Stephen Covey was an American author, educator and businessman. In 1996 Time Magazine named him one of the most influential people in the US. He had a famous quote when it came to starting a business and it is one that I believe should resonate with every entrepreneur.  He said “Start with the end in mind”. Read on to find why you should start your business with an idea of how you will sell it.

 

STEP BACK:

As an Entrepreneur you will have spent years honing your business and making it the very best it can be. You will undoubtedly be an expert in your product or service and will have often grown the business successfully from very small beginnings. However, often entrepreneurs and business owners are not as good at stepping back and looking at how to optimise the value of their business. They get caught up in making money in the present.

 

START WITH THE END IN MIND:

When you start a business you often need funding. For that you will need to get a business plan together. That business plan takes into account the business idea, the people you will need to help you, what money you will make and how much you will need to facilitate all that. Actually you should also consider what it would take to sell that business. The most valuable and attractive businesses for sale are ones that are on a clear upward financial growth trajectory. You need to be able to demonstrate that within your business structure. Make a plan. How will you grow your business? Who will you need to help grow your business? How much would you like to sell your business for? Come up with an exit plan because the decisions you make early on in the business will enhance your business down the road and ensure you get the best price for all your hard work. 

 

EXIT STRATEGY:

It is common for an entrepreneur or business owner to grow their business with the aim to sell for a profit eventually. If this is your goal then do not make the common mistake of thinking that selling your business is going to be fast and simple. In reality it is likely to take you years to get your business ready for sale and to achieve the best price. You will need an exit strategy to maximise your business value. As part of that you must work out how to optimise the value of your business over a period of time and often this involves growing it. You should spend at least 3 years on an exit plan. As part of that business plan independent advisors like coaches and mentors will be invaluable in guiding you. It will involve a lot of stepping back and delving into parts of your business which are not being currently optimised. An exit strategy is necessary because maximising your business value may be the difference between attracting multiple buyers to drive up your sale price or only attracting one buyer who drives the price down. The very worst case scenario is that you attract no buyers at all and all your hard work is for nothing.

 

SPEND TIME:

An exit strategy will take time. Starting your exit plan at least three years in advance will enable you to think about exactly how you want your business to be viewed when it goes to sale. Many entrepreneurs have worked long hours and spent valuable time making the company a success. Many then decide to sell in a heartbeat. However, when exiting a business it should take as much thought as you put into starting the business.  It could take you 5 to 7 years to get it to a place where your business is ready for sale. Don’t rush it or you will lose value rather than add it.

 

BUSINESS VALUE:

In the US around 80% of businesses listed for sale on an annual basis do not sell. If you don’t have an exit plan you may find yourself backed into a corner and forced to sell. In that situation the buyer has all the power and you may find yourself selling for a lower price than you anticipated. Hours of hard work will have been spent on growing your business so it is important you spend time maximising the value of your hard work and turning it into an attractive proposition for the buyer. A buyer is only interested in getting the best business for their money, they are not concerned with how hard you worked to get the business to where it is. They will pay for financial metrics so ensure you have obvious value in your business. 

 

ADDING VALUE:

Think about how you will approach this sale. If a business is generating income and has a good reputation then with an exit strategy there is no reason that it won’t sell. When you start thinking of exiting, ask yourself these questions: Would you pay what you are asking for your business? Do you have the metrics to back it up? You must structure your business for sale. You can lose up to 50% of the value of your business if you don’t have a strategy. The business must be properly positioned and have a story to tell. That will create value overnight. Otherwise you may find your deal is optioned and structured in such a way that you lose value. It is important there are no weak spots for prospective buyers to take advantage of.

 

BE PREPARED FOR UNEXPECTED EVENTS:

When running your business you need to make sure it can withstand an unexpected event. Be prepared. You must always have a plan of what to do if the economy is rocked and your business is affected in some way. It’s the same when exiting your business, plan to ensure your business can still sell for the maximum price despite the economic landscape, which as we know is always subject to change. Almost every business can be sold at any time if it is positioned correctly and very often for more money than anticipated.

 

If you want further advice on how to get an exit strategy in place and to grow your business, get in touch.

Remember; failing to learn, is learning to fail.

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