Let’s talk about a future sale of your business.
Beginning with an end in mind is a critical point in business success. Just like a long summer roadtrip, businesses need a comprehensive roadmap and clearly marked entrance and exit ramps to guide our way through to an endpoint.
Consider for example the possible timing of your business sale — are you looking at 3 years, 5 years, or even as far out as 20 years? Whatever the answer, I encourage you to start building your exit vision now. Why? Well, our Black Dress Circle peer advisory discussions this past month centered on actions we can take today to make our businesses more valuable to prospective buyers tomorrow (“tomorrow” as in 3-5-20 years from now). We talked about several important factors that impact company valuation, such as:
- The critical nature of record keeping
- How prospective buyers evaluate growth potential
- Revenue stability
- Repurchase and referral rates
- And much more…
More broadly, the 8 Drivers of Company Value challenges us to examine where our business’ strengths and vulnerabilities are, and take intentional and proactive actions around them.
Hub & Spoke, one of the eight key drivers of company value, was a major focus in our peer advisory discussions. One key question we looked at — which impacts you critically both now and in a future sale — is:
What if you unexpectedly couldn’t work for three months?
Life takes unpredictable detours so we must prepare ourselves and our business to travel bumpy roads. Ideally, we want our business to be able continue humming in our absence for at least 90 days without great strife. What contingency plans do you need to put into place to ensure your business is safe?
Of course, ultimately, financial performance is king when selling a business, and there can be an infinite amount of discussion around what needs to be done to drive financial performance when preparing for an eventual sale. But beyond that, there are two critical planning questions to ask yourself: the when and the how.
- HOW do you plan to exit your business?
- WHEN do you plan to exit your business?
When looking at how to exit your business, there are many routes to explore and choose from:
- Sell to employees
- Sell to an outside buyer
- Sell as a strategic roll-up
- Pass-on to a future generation
- Appoint someone (i.e. become an absentee owner)
- Close the business (ie. no prospective buyer)
Having an idea of how you plan to exit your business makes an impact on when you’ll be able to realistically exit your business — because you’ve got to make sure you’ve got the right team in place to facilitate the exit. (Note: Outside consultants are paramount to this process, as they bring an objectivity that you or another insider simply can’t provide. Exit planning is too sensitive of an issue to be handled as a DIY process!)
My challenge for you:
Sit down and determine the potential hows and whens of exiting your business — no matter how far in the future it may be. Then review the 8 Drivers of Company Value and decide which component is most critical to shore up in the immediate future (hint: it should probably be Hub & Spoke, unless you’re already feeling secure in that area).
And finally, how can you shift these focuses into higher gear for yourself and your team while keeping your eyes focused on the road ahead?
In your challenges, remember that small and consistent changes over time add up to big changes and steady growth.
P.S. – Think you don’t have the bandwidth for developing an exit plan as a solo-preneur? Register for our Time Management & Calendaring Online Workshop coming up on 8/24/18 to learn how to make time to work ON your business instead IN your business.