In order to sell your business on your own terms, you have to be proactive, get your house in order and make sure your financial records are in shape.
Today’s issue of Tire Review had this article, relevant to all small business owners asking the question: What’s Your Exit Strategy?.
He opened the article by saying: “I recently asked a friend in his late 50s about his plans for retirement. He told me he expected to die at his desk – and he was serious. He gave no thought to a time when he wouldn’t be in his business.”
This scenario the author described isn’t just true of his friend, but it’s true for over 90% of all baby-boomer business owners. Most business owners do not have an exit strategy. The risk increases the older you get without a plan.
“Part of being a proactive business owner requires that you look a few moves down the chessboard – whether that means keeping the business in the family, turning it over to a management team so you can golf more or selling the business.”
This article rightly highlights the impact of unprecedented industry consolidation. For any shop owner contemplating a future sale, even years down the road, he outlined a few things you should think about to get your business ready. For example, he talks about getting your house in order and the process of due diligence. These are strategic efforts which are essential to building value in your business to maximize your return. They are also important elements in a strong exit strategy.
I concur with this conclusion:
“The sale of a business does not always occur when or how business owners expected. In many instances, owners who gave little thought to a sale are approached by a potential buyer and suddenly, they’re in the game. In other instances, sales occur during times of desperation, when businesses are struggling.
Many people mistakenly believe they’re sitting on a gold mine. Sometimes they’re right, but more often they’re wrong.
Experience shows that valuation is not what tells people it’s time to sell; it’s what they feel in their heart that speaks to them. Until that time comes for you, be realistic about where your business is now and where you want it to be, and plan ahead. If it’s not time to say goodbye, look at how you can build up your business and preserve value.”
If you need help to start planning ahead and building your exit strategy, contact us or call 508.820.3322 for a free consultation.
New research shows the majority plan to leave their businesses within 10 years
In a press release this week, Securian Financial Group released the results of a recent exit planning survey of 500 small business owners. Their results highlighted several points that apply to you:
- “More than sixty percent of small business owners have no plans for exiting their businesses nor are they working on one. “
- They are “so consumed by running their businesses that they haven’t found time to start the [exit] planning process.”
- “Small business owners who may be counting on their companies to fund retirement or provide a source of retirement income may be in for a surprise.”
- “One third of the business owners we talked to plan to leave their businesses in the next five years and 60 percent plan to exit in 10 years, but many of them have no exit plans in place,” said Andrew O’Brien, director, Client Solutions, Securian Financial Group.
- “With no exit plan, the small business owner not only risks the future of the firm but also its ability to generate income for the founder.”
- “Many owners have yet to find someone to run the business after they exit nor do they know how much their businesses are worth. Those who look for assistance with an exit plan say legal and financial expertise are most important. Many look for a team of experts.”
- “More than half of the people we talked to plan to sell their businesses, either to a partner, key employee or third party,” said O’Brien. “An exit plan helps the founder lay the ground work for a successful sale.”
I could not agree more. The urgency to act is now. Exit planning is not a weekend do-it-yourself-project. Hire an exit strategist who will mentor you through the planning and execution of your ideal exit strategy. Early exit planning reduces risks, increases options and ensures you can successfully sell your business for maximum profits.
If you have no exit plan, call 508,820.3322 or contact us. for a free 30 minute confidential consultation to discuss your objectives and to determine what you need next on your timeline.
Define Your End Game –Plan Your Exit From the Outset
If you are an aspiring entrepreneur, or an early stage entrepreneur launching your own business:
- What do you dream of achieving with your business?
- In the end, what do you want out of your business?
To ensure your business becomes a wealth-producing machine, you must define your end game from the outset.
In this presentation, exit strategist, Kerri Salls reveals strategies and secrets your expert advisors want you to know but no one told you.
You will learn:
- 4 reasons why you need to define your end game now (even before you make a profit)
- 6 long-term options that give you more choices and flexibility and can minimize your tax burden
- 4 short-term options if you intend to fast-track your business to an exit
- How to use timing, valuation, and contingencies to gain leverage
Kerri Salls, Managing Director at This Way Out Group LLC is leading a revolution in the exit planning field. As a prominent exit strategist and mentor who prepares owners and entrepreneurs to achieve their optimum exit plan, she helps owners establish a strong foundation to accelerate growth, and maximize value; and to design, execute, and orchestrate an exit strategy that creates wealth.
Leaders exit decisively. They know when to leave a situation or relationship or role or job. Exiting can be painful, unexpected, frustrating and dramatic. Exiting can also be exciting and challenging. Exiting can be both good and bad. There are ex-jobs, ex-companies, ex-spouses, expats, ex-presidents, ex-players and more. Leaders actively look for the next door to walk through by exiting the previous one. A great leader consciously exits and has an exit plan. A good leader doesn’t slam the door shut completely but leaves a connection to the past in place. The connection could be in lessons learned or in relationships. Leaders are active and decisive in exiting one door and entering another. What do you need to exit and what’s your exit plan?
Did anyone ever tell you you were going to have sell your business, or plan for the end of your business to be able to cash out? In an article entitled, How Will You Leave Your Small Business The Last Time?, in Forbes this week, author Jim Blasingame started with the statement:
“Every small business founder gets to decide when they will start their small business. But when and how they leave the business is much less in their control.”
There is plenty of support and advice available to help you start and grow your business, from advisors, coaches, consultants, training, courses, books, and videos. But until now, there’s been a dearth of readily available free information that you can access anonymously, about how to sell your business. As more owners figure out that the biggest payday of your life only comes when you sell your business, the subject is starting to percolate up into strategic decisions owners are making along the way.
As Blasingame points out in this article, how you leave your business is not as straightforward or simple as launching it was. His new survey results show no improvement in small business owners’ preparedness to plan or execute their intended exit strategy. Too many owners are resigned to the default option of exiting feet first. His last question is one you can’t afford to ignore or not answer:
“One day in the future will be the last in your business. Are you making plans for that day?”
As an exit strategist, I see too many owners selfishly resign themselves to the default option without considering the impact on employees, customers, vendors, family or their spouse. Expecting your family, grieving spouse, and your advisors (whom your spouse does not likely know well) to clean up the business, sell it or divest of it in some way in order to generate the wealth and security you wanted to leave them, is abdicating your ownership responsibility. It’s up to you to decide how to sell your business, scale it or pass it on to successors.
Please contact us for a FREE 30-minute confidential consultation to discuss your objectives, timeline and how to plan for your last day in your business.
In a news report this morning on CBS This Morning, Cultural Correspondent, Wynton Marsalis presented a piece called Symphony and Scrimmage comparing the central role that conductors and quarterbacks play. I couldn’t help but relate all that they have in common with the central role of your exit strategist. I have been using the analogy of the symphony conductor a lot this year. Look at the parallels between these two outstanding professionals, Tom Brady and Alan Gilbert, legends in their own fields. Look for the skills and results that you would want from the exit strategist at your side to achieve your optimum outcome.
As Patriot’s quarterback, Tom Brady and New York Philharmonic conductor, Alan Gilbert related in the piece, the quarterback/conductor must:
- Understand the function of every role
- Have a sense of what every player is going through (every player on the field, every instrument and musician in the orchestra)
- Not dictate how each person performs
- Reacting to how each person offers
- Bring out excellence of every player on the field/every musician on stage
- Know exactly what they are going for, what result they want from each player/performer
To Achieve Your Exit Transaction/ Transition
Correspondant Wynton Marsalis explained that: “A well-balanced football team plays like a symphony orchestra. Their performance is a delicate balance….The professions are strikingly similar.” That delicate balance is imperative to achieve your exit transaction/transition.
To achieve their objective (winning a football championship/ delivering a world class performance of a symphony) the quarterback/conductor will:
- Prepare extensively long before the team/orchestra is assembled to practice together
- Constantly look at everything
- Set the pace/tempo of the game/symphony
- Synchronize the entire team/orchestra
- Be one step ahead of everyone else, to control the present moment of play and see ahead/read the score ahead to queue the right player/musician to join at the right moment
- Harmonize the mechanics of game play/movements of the symphony
- Bring excellence, emotion and heart and timing to every game/symphony performance
Behind their perfect precision and finesse, is their ever present understanding of human fundamentals. Both of these world-class facilitators (Tom Brady and Alan Gilbert) said that the great thing about the football team/the orchestra is how they come together. The results defy belief, the parts together add up to something much bigger to excite the imagination. A sight to see.
Isn’t that what you want from your All-Star exit team?
Your Exit Strategist as Conductor of Your Orchestra
Review these lists of what a quarterback/conductor must do and will do to achieve those world class results consistently. Isn’t that the standard of coordination, cooperation, collaboration you want your exit strategist to bring to your all-star exit team, planning your exit strategy?
If you’d like to learn more about how Exit Strategists at This Way Out Group can facilitate your strategy and your team of exit advisors (your football team/your orchestra) to achieve your ideal exit, call or email me today.
Most business owners and entrepreneurs work hard every day to grow their business. But are you focusing on growing the right things to make your business more valuable and sellable to your ideal buyer?
Do you know what buyers are looking for? Do you know what value drivers in your business, your ideal buyer will be looking for? Here are 5 areas where you can add business value just by what you focus on.
What makes you unique in your market? What do you do that your competitors don’t do or can’t do?
When your product or business model is hard for someone else to clone or copy, or you have built an enviable client-base, a buyer will pay a premium for what you have in place because it would cost them more in dollars, time and risk to reinvent your business.
Systems and Value
When a buyer closes the deal and buys your business, how easy will it be for him/her to step in and keep operations running smoothly?
Every system and process you document to run the business without you, can be monetized to add to your business value at the sale. Demonstrating that the business can run well with your team, your systems, and your procedures validates your position and gives you more leverage in negotiations. When you sell, can the business run consistently without your day-to-day oversight? Do you have contingency plans in place so that your team is prepared and can handle all key issues that may come up from time to time? Is your customer loyalty to the company and the brand or are they only tied to you and your personal relationship with them? Wean your clients off your personal relationship to demonstrated added value in the business.
You know the phrase, ‘you only get one chance to make a good first impression’. When it comes to buyers considering acquiring your business, that curb appeal typically starts with your financials. Before a buyer will pursue the deal any further, they will want to review your financial statements and forecasts thoroughly. They are looking for clean up to date books. Beyond those basics, they are looking for a track record of growing both revenues and profits. Anything less gives them an argument to reduce the valuation of your business. Do whatever it takes to clean up the books, keep them current and strong and demonstrate growing business value in both revenues and profits.
Look at your customer base. What is the distribution of revenues among clients? Are your sales distributed across a wide base or concentrated in a small number of preferred clients? Is your client database current or out of date with lots of former clients still listed? A business appraiser will recognize and monetize a good, strong, clean database as an intangible asset to be valued in the sale price.
Acquirers will review and analyze your customer database to determine how stable sales are, the lifetime value of each client, the lifecycle of each client, and to determine their retention rate after the acquisition.
Future Growth Potential
A buyer’s due diligence is quite invasive – especially in a privately held business where this level of detail and these documents have been held close for years or even decades. Buyers are simply identifying the risks they’ll incur for the price they are willing to pay. Buyers want good odds that they’ll not only breakeven after the sale but indeed sustain growth to increase their returns from future growth. Always be prepared to demonstrate a track record of achieving milestones and how you consistently hit your projections, to build confidence in future growth potential.
If you prepare your business all along the way to be buyer ready and buyer attractive, you will know the range of business value that it is worth in the market and that you would consider, before any buyer or acquirer comes knocking. When you are always building business value to make it saleable, you gain more leverage and can command a premium price.
If you would like to establish value drivers in every area of your business to grow your business value, check out this one year program.
When you want to sell your business, you want to command the highest possible value. For your business to merit the highest valuation, you must prove to the business appraiser and your prospective buyer that the value is in your business, not in you the owner. That means transforming you as an Operational President to become a Strategic CEO.
To start and launch a successful business, it is common for the owner/founder to ‘do whatever it takes’ to make it happen. That drive and commitment to move the business forward is essential to achieve your goals and objectives.
The control to achieve your goals and projections is often concentrated in you the owner, acting as the operational president. However, this must change for you to successfully transition out of the business and be compensated for the true worth of the business. Letting go of day-to-day operations is a tall order for many owners. To become a more strategic CEO and demonstrate that the business value is in the business itself, here are some suggestions to work yourself out of any day-to-day operational role:
- Create systems for everything. If you have systems, be sure they are documented. Document everything you do for the business (for every hat you wear). Anything that can be systematized and is repeatable can now be assigned to someone else. Once documented it can be assigned to someone else and come off your plate.
- Delegate everything. When your business can operate day-in and day-out without your hands-on oversight, you have a money-making machine that will attract buyers. This one change takes time, not days or weeks, but years. Identify the three things you absolutely love to do in your business and the three things only you can do. Delegate the rest. Be vigilant.
- Develop a succession plan throughout the company. Succession is not just for family businesses. Target and create a succession plan for your top people in every department and at every level. Groom them for the next step up and two steps up at all times. By building depth within the business, you add value for the buyer and secure their long term employment even under new ownership.
- Plan for scalability. Any business that is scalable has more value. Demonstrate that you are scaling successfully, even before the sale; now your business model can command even greater value.
When you apply these four suggestions diligently, you will work yourself out of the job of Operational President. You will free up your time to be a Strategic CEO and to focus on the things you love and what only you can do to grow your business to make it both buyer ready and buyer attractive.
Our new program, Build Your Business Value, helps you enhance the value of your business with 48 value drivers in 12 areas while improving your strategic position in the market.
I’ve been hosting the radio show, Exit This Way on URBusinessNetwork for going on a year now. We’ve produced over 130 interviews to help owners of privately held businesses, like you, to understand and prepare for the biggest payday of your life – selling/ scaling/ cashing out of your business on your terms on your timeline.
URBusinessNetwork today posted an extensive blog about the Exit This Way show and what we do at This Way Out Group. Check it out: http://urbusinessnetwork.com/kerri-salls-is-host-of-exit-this-way-on-the-ur-business-network/
Having a show on exit strategies sounded like a narrow topic but Kerri has recorded over 100 shows and continues to amaze us with her continuing to produce relevant content. She has introduced us to Lawyers, Accountants, Investment Bankers, Business Experts and entrepreneurs from across the world. Her message is that it’s never too early or too late to plan your exit.
If you have an exit story you’d like to share, or you know an expert who can contribute to the discussion of what owners like you need to know now, have them contact me. I always welcome new interesting guests for a conversation you need to hear to prepare for your exit, whether in three years or thirty years.
At This Way Out Group we believe an owner should not try to sell/scale/pass on their business to a successor on their own or with just one or two expert advisors. We know it takes a team. And to be successful achieving your optimal exit, that team must be coordinated to cooperate and collaborate in your best interest.
The second part of our new paradigm is advocating that every business should have an exit plan from day one, as a framework for every decision you make. If you didn’t start with a plan, start now.
The third leg of our new approach is educating you that early exits are in your best interest ( the owner).
Listen to the shows we’ve recorded on Exit This Way. Our guests contribute to this new paradigm shift. Down load them to your Ipod and listen in the car. You will get an unparalleled education you cannot find anywhere else.
To learn more about how our new model can work for you, your business, your family and your legacy, email me or call.
As the owner of your business, you always have more to do than you have time to do it. You always have more to do than hands to get it all done. So when any of your outside advisors suggests starting early on anything strategic, be it wealth planning, estate planning, contingency planning, long-term tax planning, even goals and strategies to grow your business; the urgency isn’t always obvious.
Compared to product and service delivery, customer satisfaction and controlling costs, it is very challenging to find time to focus on and execute strategic projects and changes to build value into the business. The ROI on the time and effort required to build business value is years if not decades in the future.
Here are a few reasons disguised as incentives that may tempt you carve out the time and commitment to build business value now.
- Start focusing on what will increase business value, not just revenue. This will give you a longer lead-time to leverage and compound that increasing value.
- Prioritize working on the business, specifically to add value. This will lead to stronger results on the top line and the bottom line over time.
- Transfer operational responsibility to your team. This will free you up for more strategic efforts and demonstrate the value of your business is in the business, not tied up in you the owner.
- Build strong deep fundamentals in every area of your business. This will provide proof of what you know the business is worth, adding leverage in any transaction negotiation.
- Timing is everything. Run your company with clean books, up to date governance agreements and documents, with systems and processes in place to drive growth. Consequently, your business will always be ready and will ‘show better’ to any potential buyer (solicited or unsolicited).
When you apply value drivers in every area of your business, consistently reinforce them, and track the impact, then the positive compounding effect on Net Profit and Valuation is dramatic.
That doesn’t happen overnight or by itself. It takes time to build business value so you can harvest the wealth tied up in your investment in your business.
Check out our systematic approach here. Build Your Business Value is a 12 month program to set you up to add value in every area of your business.