What do we own today that we didn’t own twelve months ago?

There’s a walk AnneMarie and I do fairly regularly on a Saturday morning near home.

It’s around 90 minutes from end to end.

Parts of it run above and across the cliffs. Other sections drop down onto the beach before climbing steeply back up again.

In the peak Algarve heat, it can be pretty unforgiving.

By the time we reach the end, particularly in the summer, we’re usually exhausted.

There’s a definite satisfaction in knowing you’ve finished it.

Now imagine something slightly ridiculous.

You get to the end.

You’re hot. Your legs are tired. You’ve just spent 90 minutes negotiating cliffs, sand, climbs and uneven terrain.

And someone says:

Great. Now turn around and do it again.

You eventually make it back.

And they tell you to go again.

Then again.

Every time you reach the finish line, you immediately return to the start.

I can’t imagine we’d keep doing it for very long.

There’s something about that which reminds me of how many businesses operate.

You start the year with a revenue target.

You sell
You deliver
You solve problems
You manage people
You hit the number

Perhaps you make a really good profit.

You reach the finish line.

Then January arrives.

And someone effectively says:

Great.

Now do it again.

The revenue counter goes back to zero.

The pipeline needs rebuilding
The projects need replacing
The clients need winning

Another £1m has to be found.

And then, if everything goes well, twelve months later you get to do it all over again.

There’s nothing inherently wrong with that.

Businesses require effort, but I think there’s a more interesting question.

By completing this year’s journey, is next year going to be any easier?

What If You Weren’t Starting Again?

Imagine if the walking worked differently.

Every time we completed it, we got fitter.

We learned where the difficult sections were.

Someone put steps into the steepest climbs.

We discovered a better route.

We left water where we knew we’d need it.

The walk wouldn’t disappear.

We’d still have to cover the distance.

However, we wouldn’t really be starting again from the same place.

And I think that’s an important distinction in business too.

At the end of another year of trading, you’ve obviously generated revenue.

Hopefully you’ve generated profit.

But what did the business actually keep?

What exists now that will make next year’s journey easier, more predictable or more valuable than the one you’ve just completed?

Income or asset?

Imagine two agencies.

Both generate £1m of revenue.

Both make £200k of profit.

If you looked at their P&Ls, you could quite reasonably conclude that they’re very similar businesses.

Now look underneath the numbers.

The first agency generates most of its revenue from individual projects and the founder wins most of the important work.

The largest client relationships sit predominantly with them.

A huge amount of knowledge exists inside the heads of individual people.

There is little proprietary IP.

And there’s no particularly reliable way of predicting where next year’s £1m is going to come from.

It has been a good year.

The founder has earned well.

The company has made a healthy profit.

Then January arrives and much of the journey begins again.

Now consider the second agency.

Same £1m revenue.

Same £200k profit.

£500k of next year’s revenue is already contracted.

Important client relationships exist across the wider team.

The company has developed methodologies and intellectual property that it can use repeatedly.

It has built a recognised position in a particular market.

It has an audience and a network that consistently generates opportunities.

Other people in the business can make meaningful decisions without waiting for the founder.

And some of what it sells can be delivered repeatedly without recreating everything from scratch.

Now imagine the second agency has spent the last few years deliberately building some of those things.

Same revenue.

Same profit.

Radically different businesses by structure.

Both completed the walk.

Only one improved the route.

There’s nothing wrong with earning an income

I think this distinction is important because it’s easy to turn conversations like this into another version of:

You need to build a business you can sell.

I don’t think that’s necessarily true.

A business can be an excellent income-producing vehicle.

If you own a company that consistently generates £200k of profit, provides you with interesting work, employs good people and gives you the life you want, that’s a perfectly legitimate outcome.

You don’t necessarily need to turn it into something somebody else wants to buy.

However, I do think it’s important to step back and try to truly understand what you’re building.

There’s a difference between a business that rewards you for another successful year of effort and one where each successful year also leaves something behind.

Perhaps the simplest distinction is this:

Income rewards you for the year you’ve just had.

Assets improve the years you haven’t had yet.

And by assets, I don’t simply mean things that appear on a balance sheet.

What are you accumulating?

Every year you run your business, you have the opportunity to accumulate advantages.

Revenue advantage

How much of next year’s revenue is already secured before the year even starts?

Knowledge advantage

What have you learned this year that has been captured and can be used again?

A methodology
A process
A framework
A piece of intellectual property

Relationship advantage

Are important client relationships becoming broader and deeper across the company, rather than remaining dependent on one individual?

Distribution advantage

Have you built an audience, reputation, referral network or route to market that makes finding the next customer easier?

Capability advantage

What can the team handle today that would have needed you twelve months ago?

Financial advantage

Has another profitable year created cash reserves and investment capacity?

None of these mean you get to stop walking.

Next year will still require effort.

Clients will still need serving.

People will still need leading.

Decisions will still need making.

Revenue will still need winning.

You’re starting next year’s journey further ahead and with clearer expectations on what lies ahead.

Some business value disappears surprisingly quickly

There’s another side to this.

Not everything we think we’ve built actually lasts.

A fantastic project ends.

The revenue disappears.

A great employee leaves.

If what they learned was never captured, the knowledge can leave with them.

A founder spends twenty years building an incredible network.

However, if every relationship exists personally with the founder, how much of that network really belongs to the business?

Your pipeline may look impressive in December, but as projects are delivered it continually needs filling again.

A business can therefore spend an enormous amount of energy creating value that has a very short shelf life.

There’s nothing necessarily wrong with that either.

However, we should recognise it.

There is a fundamental difference between creating value and retaining value.

Some businesses spend every year accumulating advantages.

Others spend every year rebuilding advantages that expired yesterday.

What does this have to do with options?

Last week I wrote about something I’ve been thinking about while planning the next three years of my own working life.

I don’t have an exit plan for Nuvem9.

I’m trying to create options.

The option to work fewer hours.

To travel more.

To spend more of my time doing the work I most enjoy.

To make Nuvem9 less dependent on me personally.

And to build more revenue that isn’t directly connected to another hour of somebody’s time.

Those options won’t suddenly appear in 2029.

They have to be built between now and then.

And that changes the way I think about what constitutes a successful year.

Of course I care about revenue.

Profit matters.

Cash matters.

Growth matters.

However, I’m increasingly interested in another measure:

What does Nuvem9 own at the end of this year that it didn’t own at the beginning?

What are we trying to keep?

The Nuvem9 itself is a good example.

It’s a framework we’ve developed from years of working with businesses and understanding the numbers and questions that actually help founders make decisions.

If we develop it properly, it doesn’t disappear when a client engagement ends.

We can use it again.

We can improve it.

We can build products around it.

We can use it within advisory engagements.

And other people can eventually use it without me having to personally recreate the thinking every time.

The same applies to the content we’ve been creating.

An individual newsletter like this isn’t particularly valuable as an asset.

However, over time, the ideas, audience, frameworks and products that develop from that content potentially are.

The same is true internally.

If another member of the team can own something this year that previously required me, the business has accumulated capability.

If more of our revenue becomes recurring or repeatable, we’ve accumulated revenue durability.

If another profitable year strengthens our cash position, we’ve accumulated financial resilience.

Those things don’t necessarily make Nuvem9 bigger, but they potentially make it better.

And, importantly for me, they give us more options.

A different way to review the year

As we move towards the final quarter of the year, most businesses will eventually start looking back at their performance.

We’ll ask familiar questions.

What was revenue?

What was the profit?

Did we hit the budget?

How much did we grow / shrink by?