4 Tips to Design Your Exit Strategy
Hope your week got off to a great start.
I have had several great conversations with clients about their exit strategies for their businesses. One client has a CPA firm they want to sell, another has an investment company he wants to sell, and the third has a wholesale business he wants to sell in 3-4 years.
Understanding and planning out your exit strategy in ADVANCE of needing to execute it is a major leverage point in your business success.
Here are 4 specific suggestions to create and execute on your exit strategy for your business.
Tip One: Clarify your exit UP FRONT so that you build your business with the end in mind.
There are four main exit strategies for business owners: sell… scale… own passively… or pass the business on to your heirs as part of your legacy.
Which of the above strategies is your preferred ultimate business outcome?
Most business owners only look at how they can operate their business, doing the job of the business as a means to generate active income to live off of. Smart Level Three business owners know that by clarified their ultimate business outcome, they will grow their business smarter and faster.
Tip Two: No matter what your exit strategy, build your business so that you COULD sell it; it will help you build a better business to own passively or scale.
I’ve given this advice to thousands of business owners over the years and I’ll say the same thing to you: if you build a business that is more saleable, the things that you do that make it more saleable make the business easier to own passively or more able to be scaled successfully.
These include things like:
- Decreasing the business’s dependence on you the owner
- Having strong controls in place
- Having a sales system that guarantees future growth and reliable income streams
- Reducing any customer concentration issues
Tip Three: Look at your business through the eyes of a buyer TODAY, and you’ll see the essential steps for you develop a more valuable business.
Buyers care about things like do you have solid business systems in place? Do you have key branding or other protections from competitors in your market space? Do you have a solid and growing sales pipeline? Is the business independent of the owner or are all real decisions and actions based on the owner’s involvement? Etc.
You learn so much about your business when you go to sell, that’s why I suggest you don’t wait until you put your business up on the market to get this feedback. Give it to yourself by conducting your own “buyer’s audit” of your business.
Tip Four: Most exit strategies require 24-36 months to pull off to best effect – plan today for your eventual exit.
Too many business owners make the million dollar mistake of waiting to prepare their business for their exit until the year in which they want to pull the trigger and execute their exit.
Instead, savvy business owners know that they need a minimum of 24-36 months to maximize the value for a sale… or to transition to a passive ownership role in an intelligent fashion.
Some things just can’t be rushed.
I hope these four specific tips really prompt you to think today about the tomorrow you are working so hard to create.
Also, if you haven’t already got a copy of SCALE: 7 Proven Principles to Grow Your Business and Get Your Life Back, then I really encourage you to do so. It will be one of the most important books you read this year.