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How to Set Goals That Ensure a Successful Exit Strategy

There’s a lot on your plate when you start a business. Of course, you need to be clear on your mission and vision, your business model, your market research, marketing and sales strategy and your operations to implement your business plan. You can be consumed by the day to day responsibilities and urgent demand. All of this eats up time.

There’s another critical piece that’s easy to put off but very critical to achieving your long term goals and that is your exit strategy.

If you set your exit strategy as part of your initial goal setting then all your goal achievements will lead towards your ideal exit strategy.

Here are 5 recommendations to ensure you set goals that get you to a successful exit:

1. Choose the right exit strategy for your goals
You have monthly and annual goals for your business. You want to commit to these intermediate goals only if they are aligned with your long term goals and the ultimate goal achievement of your ideal exit strategy.

2. Set business growth goals aligned with your exit strategy
Your growth goals are essential to the healthy, strength and survival of your business. When you look at your growth goals in the context of the exit strategy you want to implement, be sure your growth goals are taking you in the same direction. Growth that is in conflict with your exit plan or competes with your long term goals will hurt the business and limit your ability to achieve your exit strategy.

3. Identify goals to increase value
The value of the business is not just in terms of assets or cash flow. It’s also in your intellectual property. Your intellectual property could be in your team, your processes, the relationships you cultivate and maintain with clients and vendors, etc. So your goals to increase value before your exit could be in these less quantifiable areas that translate into a much higher valuation for the firm.

4. Plan your exit strategy by intention rather than by default
This sounds like a lot of work. In fact, it is. But, if you don’t do the work to plan your exit – then your dream of achieving an ideal lifestyle, living your legacy and leaving a dynasty – then you are abdicating both the responsibility and the reward. If you don’t plan your exit by design, then you will settle for what you get by default.

5. Systematize your exit strategy to maximize value
The more you can systematize your business so someone else can run it equally well without out you, the more a buyer will be willing to pay you to keep it going. The better you are at systematizing everything, the easier it is for a broker to pitch and leverage that value for a higher price. This step takes discipline and consistency starting long before you intend to exit.

Apply these five recommendations to get the results you want. That’s how you achieve every goal you set. That’s how you ensure your own successful exit strategy

Where to Start Before You Set Exit Objectives

Whether you address it from the outset of your business or later down the road, every business owner needs an exit plan. Some business owners intend to sell the business for maximum profit, some want to sell it to successors or employees, others want to go public, and still others intend to keep it in the family.

In each case, taking the time to prepare the exit plan now will allow you, the owner to reach your ultimate goal with a comprehensive 360 view with all the pieces in place. Business-owner exit planning should begin five to 10 years before you want to retire or pass your business to your chosen successors.

Unfortunately, 95% of all business owners NEVER do exit planning. And they wonder why they end up with nothing when, on the day they get fed up and want to sell it as fast as they can; they accept the first offer they receive – at a discount of 30-50%.

That doesn’t have to be you.

Plenty of expert advisors will tell you that exit planning starts with your exit objectives and the retirement income you want to have – because that’s where they start working with clients.

There are a few other pieces you need to define BEFORE you can answer those two questions. They are core pieces of having a strong business foundation long before you consider implementing any exit strategy.

Before you can define your exit objectives, you must identify:

1. Your long-term ultimate goals for the business – with you or without you
2. How you want to secure your legacy now, before you leave
3. How you want to ensure your dynasty once you exit the business
4. Who you want to take leadership of your business (as owner, non-owner manager, or transition staff)

What still needs to be done in terms of business planning, contingency planning, and succession planning to position the business for maximum growth and value? Work on that planning first, as a prerequisite to detailed exit planning.

Multiple Objectives
You may have multiple exit objectives. Be sure they are consistent. Then prioritize the outcomes. Selling fast, selling for maximum value and selling for 100% cash up front can be conflicting goals.

As part of your transition planning process, when you define what your next step will be after you exit, you’ll get a better idea of how much funding you need: for a new venture, to invest or for philanthropy; not just your personal retirement income. You’ll also get clear on your goal timeline and your options for what format the transaction can take.

The lifestyle you intend to pursue after the exit may expand or restrict the exit options you consider.

‘You don’t have to have a plan today.
You do have to start planning today.”

The more lead time you invest in building a strong business to achieve your ultimate goals, the more fruitful and fulfilling will be the exit strategy you can choose to implement.

Where is Your Value? Is It In You Or In Your Business?

Do you know where the value is in your business right now? Is the value in you, the owner/entrepreneur? Or is the value truly in the business itself?

This is the uncomfortable wakeup call for most entrepreneurs. Are the expertise and the business strategy all in your head, and in your proprietary files? Here’s the risk:

You have nothing to sell and
you have no exit options
if this is still true.

Instead, you can and should start now to:

  • train others on different pieces,
  • outsource different pieces, or
  • start delegating more and more.

Start now because it takes time to transfer knowledge, expertise, systems and processes, nevermind responsibilities, to others. In some cases, you’ll know exactly what to delegate and who should be doing tasks instead of you. Sometimes you already know who should take on responsibilities or who is ready to step up to take on more responsibility. When you start early, you can train and groom people to grow into positions and responsibility – which ties them to the business more. Both add value to the business when you want to get out.

When you outsource, you have the flexibility to divide up work piecemeal and try different vendors and sources to get work done. When you start early, you can find those vendors who fit your needs and adapt well to suit your corporate culture and become an extension of your team, again adding value. And if a vendor is not an asset when you are trying to maximize value for a potential buyer, you have time to find and train the replacement within your timeline.

When you offload operational responsibilities, you can focus on leadership and strategy to make the business more valuable now and for a future buyer.

The side benefit of delegating, outsourcing and automating is that you free up time to work on your most valuable activities including your exit strategy to achieve your ultimate goal.

“Business owners do not plan to fail.
But 95% fail to plan. Don’t be one of them.”
 

Plan Ahead – You MUST Know Your Exit Date

You must know your exit date
(or at least the criteria for it)
and set it at least 2-3 years out.

In order to have time to systematize, streamline and leverage your business to get the maximum valuation.

To get the results you want:

  • Your exit strategy must be part of your initial business plan
  • Your exit strategy must be part of your annual plans every year
  • Your exit strategy must be built into your 3 year goals from the outset

Identify Goals To Increase Value

What can you do to maximize the value in your business? To achieve your goal, you must:

  • Sell more
  • Increase prices
  • Reach new markets
  • Reduce costs
  • Hire/Train
  • Document your expertise
  • Research and prove your market position
  • Revisit your business plan, vision and mission statements
  • Clean up your financials

Is The Value Right Now In You Or Your Business?

This is the uncomfortable wakeup call for most entrepreneurs. Are the expertise and the business strategy all in your head, and in your proprietary files? You have nothing to sell and you have no exit options if this is still true.

Instead, you can and should start to train others on different pieces, outsource different pieces, or start delegating more and more. The side benefit of delegating, outsourcing and automating is that you free up time to work on your most valuable activities including your exit strategy to achieve your goal.

“Business owners do not plan to fail.
But 95% fail to plan. Don’t be one of them.”

Align Your Goals With Your Exit Strategy

Do you have goals now? Do you have:

  • Daily goals
  • Weekly goals
  • Monthly goals
  • Quarterly goals
  • Annual goals
  • 3 year goals
  • Exit goals

You need all of them if you want to achieve your exit goals.

They must be aligned and integrated.

Here’s a secret no one talks about but they DO want you to know:

Consistency among all these goals is essential or

  • you will fail to exit,
  • you will drastically reduce the value, AND
  • you will pay a premium for the service providers in the exit market.

And yet, all of this is 100% avoidable!

The answer is to not just set goals but to stay focused to achieve your goals.

What Is Your Timeline To Exit?

Do you have a timeline to achieve your goal? You have a choice starting today.

  • You can sell quick, or any time you want                   OR
  • You can take the time to position your business to sell high

You can’t do both.

I strongly recommend you work actively on your exit strategy starting now if you intend to implement it in the next 36 months. You have 12-24 months of work to do before you engage a broker, attorney, or CPA if you want to position your business for optimum sale.

Think about how much work is involved in getting your house ready to sell, improvements, repairs, decluttering, staging and curb appeal. The same is true for your business to get the highest valuation and an ideal buyer.

You need a goal, an exit strategy, a valuation number you are striving for, and a timeline. To do all four, you must do two things:

  1. Implement systems for every aspect of your business, in detail
  2. Get the business out of your head and documented.
Is Maximum Value One Of Your Goals?
  • What does that mean to you?
  • Goal achievement is only possible if you have a goal you want to get to.
    Do you have a number you want the business to be worth?
  • How long will it take to achieve your goal, achieve that number?
  • How important is that number to your personal long term plans?
  • Do you have a number that you need in the bank in order to secure your retirement?
  • Do you want to live your legacy and leave a dynasty or do you want to work yourself into an early grave?
  • Do you want to pass on the business to family or successors and create an exit package?

These are easy questions to ask. They are hard to answer. If you find yourself not doing this homework or you keep justifying why you don’t need to do this now, or you think it doesn’t apply to your business, then you are unconsciously jeopardizing your business and your future.

Set Your Exit Strategy From the Beginning

Begin With The End In Mind
Stephen Covey

There’s a lot to consider when you are starting a business. You need to be clear on your mission and vision, your business model, your market research, marketing and sales strategy; and your budget and operations to implement that business plan. It’s easy to get busy working in the business, making it a viable concern. That’s the fun and the immediate reward for your vision and effort.

Another critical piece that’s easy to put off but critical to your long term goals is your exit strategy. If you set your exit strategy as part of your initial goal setting then all your goal achievements will lead towards your ideal exit strategy. Here are six areas to explore to be sure you achieve your end goals.

You Can’t Go To School to Learn This Stuff

Schools just don’t teach this stuff, especially for private businesses. They focus on starting and running a strong profitable business, not how you’ll get out or how you’ll get your money out.

Most business owners only go through the exit experience once in a lifetime. They have no experience or hindsight to draw from to do this right.

There is only limited primary reference material available to teach CEOs how to plan and manage the business exit. The anecdotal lessons from CEOs’ personal exits reinforce the difficulties of exiting on your terms and on your timeline.

Comprehensive early exit strategy support is in short supply. Effectively executing your exit strategy requires collaborative teamwork from and with your expert advisors. You need to own the exit process as your top priority. An exit strategist can become your most trusted strategic advisor to achieve that end.

An entrepreneur who tries to continue running the company operationally and prepare the company for their profitable exit will do neither well. When you build an expert team, you can plan your exit to achieve your ultimate goal.

Selling For A Maximum Value

You want to sell your business for maximum value. Here are three solid guidelines to make that goal a reality.

Focus valuation discussions on the future potential of a business – not past performance

  • When you negotiate valuation with a potential buyer, it is essential to focus the discussions on the future cash flow potential of the business. A buyer will be more confident and engaged in investigating the purchase of your business when they can perform a business analysis and thoroughly understand the company’s financial performance.
  • To be effective in valuation negotiations, sellers will want to conduct rigorous industry research and analysis; develop defensible financial projections; and position both pro-forma financial and strategic benefits (including revenue and cost synergies) of the sale/acquisition/transition to a new owner.

Don’t leave money on the table by neglecting the intangible value of a business

  • At a minimum, expect a buyer to pay at least the basic value of your business.
  • Too often, sellers don’t recognize that they have the opportunity to monetized the intangible value of the business. When they try to go it alone, inexperienced sellers do not properly substantiate, support and quantify the intangible value of their business to maximize the sale price.
  • Applying proper valuation methodologies and techniques for your industry can help you maximize the value of your business that you can command. It is also important to use historical financial statements to sell the advantages of this purchase opportunity for the buyer.

Negotiate a winning deal structure

  • The structure of the transaction is just as important as negotiating the valuation.
  • To secure and preserve the maximum value of your company, it is critical to build a strong exit team that can effectively structure a winning deal and negotiate the terms and conditions of the transaction itself.

These three guidelines will translate to maximizing the value a buyer will pay for your business.

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