When I’m business coaching clients and we’re talking about goals, I always ask what the ‘end game’ is (exit strategy). What does the person want to do at the end of the day? Is the objective to start or grow a business, to franchise, or sell, purely be a cash cow or perhaps be their legacy? Before we even start we look at where that person is heading. This is the beginning of having an exit strategy.
What is your exit strategy?
Do you have a job or a business?
So often business owners are technically just that, business owners, but really what they have done is bought or built themselves a job. If you don’t have an exit strategy the business is completely and utterly reliant on you – then you just have a job. We might call it a business, your accountant might structure the financials and tax return as a business, but the reality is that it’s a job. For you to have a business it must become something which does not rely on you completely and fully. It should also have an exit strategy which doesn’t equate to you simply running it into the ground towards the end and essentially winding it up. That sounds more like retirement, doesn’t it!
What are the exit options?
The most obvious option is to sell, but not everyone does that. You may choose to pass the business onto a family member. This is fine and well, as long as that intended person is on board. Just because your business was your passion for 50 years does not mean your son or daughter wants to take it over. Have an honest conversation with them before you make that assumption, and please listen to what they say. Do not assume your offspring will want to follow in your steps; often, in fact, they do not. Another option is to sell to an employee and this can be done in many ways, sometimes starting with a smaller equity share and increasing that equity as time goes. You may choose to merge with another business or sell part of the business. You may consider a public offering, although investors can be demanding. However, if you’ve grown the business and it has a board which runs things, this can be a good option. The cash-cow business is simply milked dry until the end although if it’s such a great cash-cow, why not have options in place in order to make a nice dollar off it in a sale. Some entrepreneurs love the thrill of a start-up and purposely start a business with the objective of selling in 3 or 4 years. You might even consider franchising although if you do become a franchisor, then really, you are not exiting, but rather becoming more entrenched.
My friend Tony Robbins (https://www.tonyrobbins.com) says that
“87% of businesses won’t get sold”
and reiterates my point that if you don’t have an exit strategy for your business, then you really have only a job.
Tips to create a saleable business
1. Have a plan in place.
I’m talking about a business plan and clear objectives around the business you are growing and solidifying to sell, but also your plan on how to sell the business. Business owners who want to attain clarity around how to successfully grow their business and prepare it for sale will often reach out to me for business coaching. They understand that the investment of my expertise will help them put in place all the components which will help achieve a quicker sale for a better dollar amount. You also want to have in place your plan for taking it to that point of preparing to sell. Now, I should warn you here, do not have open discussions with your staff and clients. That is one of the worse things you can do. Staff (and clients) may likely perceive that their position (or the service) is not secure and will leave if an opportunity arises. Keep your plans under your hat and discuss only with your coach. I’ve seen sales handled incredibly poorly and the business value plummet to nothing, forcing the owner to simply just close the doors and walk away.
2. Finances need to be right.
You should have 3 years of solid and good performing figures to help give you the optimum price. Doing cash work and saying to an owner “but half my income doesn’t get declared” is not only illegal but cannot be substantiated, so don’t be surprised if you don’t achieve a good sale price.
3. Systems need to be in place.
A good business is one with documented systems for every aspect of the business from its marketing, through to delivery, finances and sales processes. Good solid systems are what people will pay money for. This particularly includes a very solid and tried and true marketing plan and system.
4. The nuts and bolts are essential.
The business needs an excellent website which ranks well, as well as a decent-sized database. You need to ensure that the operational side of things runs smoothly and that there is a great customer service process in place. You need to have a decent lease in place if you are renting premises. People want to buy into reliability, security and consistency.
5. You are not a key aspect of the business.
This is essential. Your business needs great team and leadership within it that means you are not doing a hundred hours a week. I know when I was gearing towards selling my previous business I had cut down to 5 hours in that business per week – that’s right per week, not per day! My face and credentials were no longer on the top of the “About Us” page of the website (but rather at the bottom) and a few key team members were trained in handling sales enquiries, managing the team and customer service. This may be a great opportunity to train up your team and find the right leaders to keep the momentum.
People sell a business for many reasons. Some sell because they are worn out, maybe even burnt out and ‘over’ it. Maybe simply by improving the business, getting some breaks, sharing the leadership, you will in fact be happy to stay on longer. Others sell because they are business builders and love the excitement of build and sell. Others have reached (or exceeded) retirement and it’s time to slow right down. For others yet again, it can be health, a sea change or a different passion which has taken their focus. Whatever your reason for wanting to exit your business, remember please there is a right and wrong way to go about it. Great outcomes occur more often when there is a smart, well thought out, relevant and written down plan in place. Determine your plan and if you need help with that – give me a call on 0411 622 666. I’d love to talk to you.