Posts tagged with: maximize value
The sellers’ window is here: 2013 – 2018. You can’t afford to wait to monetize the business you’ve built. Think about what you need to do now in your business:
“the difference between greatness and mediocrity, mediocrity and millions, spectacular and pathetic performance is how well you use your time, your opportunities, your efforts, your resources and your assets.”
“A calculated, adjustable exit strategy puts business owners in the ideal position to face the unexpected, whether the event is fortuitous, from a disagreement to a death or divorce, or providential such as an off market offer for the business.
An exit strategy enables business owners to take control of the selling process and ensure superfluous problems or delays are not encountered, which can reduce the price whcih a business can fetch.”
“A well developed exit strategy also allows you to maximize the value of the business by enabling you to address the drivers that impact the price of the sale and can manage the expectations of partners, colleagues and family.”
Joseph Bridger, Partner Corporate Transactions of Pitcher Partners
“A business that operates successfully and profitably without relying on the day-to-day efforts of the owner is something worth paying for.”
Paul Banister, Director of Tax for Grant Thornton Australia.
This process could take years and it does involve many components.
Just as your business can change, from the product mix, markets, marketing channels to management; so too can your exit strategy change. You need to review it and revise it as often as necessary, at least annually.
Here’s the recipe you need to set up in order to have the licensed transaction experts at the end, competing to sell your business and to have buyers eager to buy on your terms on your timeline:
- Start succession planning early
- Maximize valuation
- Accelerate growth
- Plan an early exit
- Make your business buyer attractive
It’s worth the time invested all along the way for you to be able to exit with the financial freedom to pursue your reinvention.
However, the most notable businesses that we remember and talk about are not the thousands of businesses that get started each year. Rather they are those enterprises that look like and act like a thriving business entity. Those businesses that survive, flourish and grow are distinctive in a number of areas. These are the business owners who actively and intentionally become strategic entrepreneurs. Here are some of the benefits they obtain as a direct result of systematizing their businesses.
- Run your business as a business with goals, budgets, strategy, campaigns, customer centric, attentive to market trends and outside influences,
- Keep accurate current financials. Do not run the entire business out of the checkbook. They can withstand a complete audit.
- Use credit and debt responsibly to grow the business because it’s built into their strategic plan
- Take direction from their Boards. Leverage their Board of Directors and Board of Advisors wisely. All because they documented their strategic plan for using their boards and trained their boards from the beginning
- Are responsive to the market because they have systems in place to monitor, the prospect market, the competition and outside influences
- They build a strong team of experts around them by expecting everyone to document standards and systems in their area of expertise from inception, company value is evident and not dependent on one individual
- They can master the art of delegating, outsourcing, and automating in every area of their business – because they have a recorded every process, policy and system to be repeatable by someone else.
- They see their productivity escalate by adhering to these systems and the team can emulate this use of systems to get more done too
- With governance and legal documents and forms always up to date – these businesses are always ready for an eager buyer’s due diligence
- With growth forecasts and goals in hand, they can anticipate capital requirements and capital expenditures and develop attractive options and minimize risks
- New systems they implement are designed for the company to grow into, replacing the systems they’ve outgrown that are holding them back
- They are very resilient and responsive because they always have a Plan B for every eventuality
- All their short-term and long-term decisions and goals have always been tied to what it would take to fulfill their Exit Plan
Systemization is a critical aspect of grooming the business for sale. It takes time to plan, decide, implement and monitor results of your strategic systemization. You will develop Key Performance Indicators to evaluate and refine these systems. When you package up those same Key Performance Indicators as a trends report with 2-3 years data – it becomes powerful proof to persuade your buyer of the value they are buying.
The foundation for growth and value for your business starts with planning.
“The average business owner spends 80 hours
preparing a business plan and
only 6 hours preparing for their exit”
ROCG 2007 Survey of Business Owners
Read that statistic again:
“The average business owner spends 80 hours preparing a business plan and only 6 hours preparing for their exit”!
That lack of preparation and planning is the reason why owners are ill-prepared to achieve an ideal exit from their business. Instead, they settle for only 50-70% of the value of their business when they sell.
It’s up to you to maximize the value you can receive at exit. It’s up to you, the owner, to demonstrate future value for the buyer, including growth projections to justify the selling price you want to receive on your terms.
You can delay and minimize your efforts and go for a sale that leaves 30-50% of the value of your business on the table or you can plan and strategize over time to prepare you, the business, and your team for the best possible outcome.
Exit planning starts with two exercises, one for you as the CEO, and a parallel exercise for the business. In this exercise you will list your personal core values, your vision and your mission.
Repeat the exercise, with or without your management team, and list your company’s core values, vision and mission.
With values, vision and mission in mind, you can start planning for your exit and what that will mean for the business as well.
By planning ahead, you can be more strategic with each hire, each goal, each decision you make between now and your target exit.
When you have a clear plan for your exit, you will make better decisions, easier, faster, with less risk, fewer mistakes and hit fewer deadends in every area of your business.
With an exit plan integrated into you business plan, corporate goals and strategy will be tied to your end goal, your personal end game.
The first step in exiting on your terms and your timeline is planning. Here are a few areas where you can start planning at absolutely no cost. Planning covers a wide range of issues, decisions and changes. Planning doesn’t have to be expensive. But it takes concentrated time, effort, commitment and follow-through to see results.
Here’s where you can get started now.
To streamline and optimize your business for maximum value, you need to think strategically and keep an eye on every facet of the business, the team and your personal goals and objectives. No one can do all that alone. It’s never too early to build your team of exit advisors.
The best advisors are proactive, open-minded and client focused. Before you commit to any advisor being on your exit team, specifically focused on your exit objectives and timeline, it’s up to you to qualify them to be part of this specific initiative. You need a full complement of advisors, not just your accountant and attorney when you prepare to get out of your business and move on to your own reinvention.
You need the full team of experts on board now to:
- Build a strong deep foundation to strategically grow the business.
- Accelerate growth to achieve your specified goals and objectives for the business.
- Protect all intellectual property – to have all patents, trademarks and copyrights secure and complete well before you want to get out, making them easy to identify and monetize.
- Get all governance up to date and compliant – That includes minutes, resolutions, and annual meetings being recorded, complete and up to date.
- Get the financial books meticulously clean – This goes far beyond balancing the books and paying taxes. It can take 2-3 years to achieve clean books ready for review or audit.
- Maximize valuation – your advisors will help keep this goal in mind at every milestone and strategic decision to ensure goals and investments are always tied to increasing the value of the business.
- Expand exit options – the earlier you start and with a full complement of advisors, you have more exit options to choose from because you have the lead-time to explore them before you decide how and when to get out.
- Ensure the business is buyer ready – your advisors will help you become a strategic CEO with the team in place to run operations independent of your daily presence. This is the easiest way to be buyer ready and buyer attractive, and demonstrate that the value of the business is in the business, not in your head.
- Get your accountants, tax advisor, estate attorney and wealth advisor on the same page. Do this early to expand your wealth preservation options to serve your reinvention goals, objectives and legacy. They can do a better job of achieving your goals when they are on board early and can implement tactics pro-actively for your future plans.
- Document and codify every system, strategy, process and procedure in the business. This one simple discipline adds value every day. It’s also one of the biggest ways that owners lose value in negotiations with buyers because they ‘never get around to it’.
- Give you greater leverage in negotiations with potential buyers. When your team of exit advisors has been working together building your business into a wealth-producing machine over time, you are in a stronger negotiating position with potential buyers.
When you surround yourself with a range of experts to support the exit process over the next 2-5 years, your business will be stronger, demonstrate appealing growth projections, will have a higher valuation than otherwise possible, and become buyer attractive. As a result, you can and will be able to exit your business by intention on your terms instead of closing the doors with no monetary gain by default.
When it’s time to get out, you want to know you will walk away with the maximum value possible for your business. To do that, you need to demonstrate the value in every corner that the buyer will want to pay for.
How can you showcase the value in each of these areas in your business?
- Financials Recasting – Often, this is a view of your business that your CPA can’t see. You want to look at all assets, not just financial statements used to minimize tax obligations.
- Market Positioning – Current market analysis and competitive research can be used to validate your 3-5 year projections.
- Pro Forma Financials – Forecasting growth and accelerated sales will appeal to your prospective buyers.
- Valuation – Know what your business is worth and demonstrate that value long before you enter negotiations with a potential buyer
- Identifying Optimal Buyers – The more you prepare your business to appeal to your ideal buyer, the closer to your maximum valuation you’ll be able to see.
- Marketing Materials – Renewing company branding and marketing materials and website, adding video, etc., puts a fresh face on the business – curb appeal always commands more value.
- Multiple Buyers – Making your business buyer ready and buyer attractive, and clearly identifying who would be an ideal buyer prepares you to recognize buyers even if it’s sooner than you thought possible. When you structure the business and your exit plan to suit your ideal buyers, you will have them outbidding each other to acquire your business for top dollar.
- Confidentiality and Timing – When you are always building your business for maximum value – not just because you want to exit fast – you are prepared to consider or reject buyer proposals long before you need to get out. It makes the timeline and milestones for exiting easier to keep confidential.
- Due Diligence – When you do your own due diligence and resolve any flags it raises before you talk with potential buyers, you get to showcase your business in the best light – for added value – eliminating possibilities for them to find flaws that would bring down that targeted highest valuation.
- Deal Structure – When you start planning your exit early, you can explore many more options, variations on those options, and then implement systems and strategies to get you the deal structure you want, so you don’t have to settle for the deal the buyer offers.
When you prepare your exit all along the way, you claim back more leverage at the negotiation table. That creates more options, flexibility and opportunities to maximize value for you in getting out.
If you would like to learn more about maximizing your value, click here and take a look at our library of articles written to help you build and exit your business for highest value.
It’s a big step to decide that you will hire an exit strategist. When you decide you want an exit strategist on your team, you want to hire someone who will help maximize the value of your business and prepare your business for sale or succession. Here are ten fundamentals to qualifying your ideal exit strategist.
- Hire someone who has done what you set out to do (e.g., launch a new product line, bring in $10M new revenue, streamline production to eliminate all late and lost jobs) to maximize the value of your business.
- Work with an advisor who has built businesses, has taken leadership, ownership, and accountability to get things done; hired the team and has risked everything themselves.
- Work with an advisor who teaches you more than one way to get things done, so you can customize the learning to you, your team and your company.
- Work with a mentor who will sit with you to collaborate, rather than a consultant who keeps himself or herself apart. You need someone so engaged in your company and committed to your goals they are always thinking of better solutions for you.
- Work with an authority, someone who gives you ideas one-on-one to run your business more effectively. Work with an authority who also offers training programs you can provide to your entire team to increase company valuation.
- Work with an advisor who is a peer, who teaches you at your level. You want a mentor who understands your size business, your industry, your challenges, who recognizes and values your objectives.
- Decide if you want an expert in marketing/sales/service/HR/finances to solve a specific problem in one area; or if you want a mentor who will help you oversee the entire operation to institute and/or refine business fundamentals.
- Decide if you want to give away your core value to an outsider to get a task done; or if you want guidance and direction from a virtual partner who will help you integrate systems and strategies to take your whole company to the next level so you can achieve the financial success you know is possible.
- Decide if you want to hire a trainer to get you started in a specific skill set; or if you want to hire a mentor who will stick with you to achieve very specific results, in this case an exit on your terms, on your timeline.
- Do you need information that a one-time consultant will produce? Or do you need the ongoing insight, experience and expertise of an exit authority to turn information into knowledge you can integrate into your business, adding value every day?
Your exit advisor is central to your successful sale, scale or succession plan.These fundamental qualifications are essential.