In an ideal world, business owners have me plan their exit strategy 5 years before a sale is even contemplated. It can be very rewarding to get this right!

But the real world can be very different.

Sometimes owners simply get tired of their business or see their business model reaching a plateau. That brings forward a more urgent exit strategy.

Perhaps akin to a Garage Sale?

Perfectly acceptable, but much better if the exit of the business was contemplated long in advance.

The problem with a rushed exit is that value is not optimised.

Where succession is contemplated in advance, there is time to look at the core drivers of business value (from our checklist) and to consider a program that addresses each one of these. These drivers ultimately become the backbone of the ‘multiple’ for the value of the business.

The irony of this approach is that, in addressing these drivers of business value, the actual profit invariably also improves. Sometimes by a large amount.

It is not uncommon for us to see a previously great business struggling along. The business may currently have an (adjusted) EBIT of say, $400k and a multiple of just three times. That implies a theoretical value of $1.2 million for the business.

But a three-to-five-year exit strategy as part of a succession program can see both numbers change considerably. Profit could increase 2.5 times (to say $1 million) plus the multiple goes to from 3 to 5.

That makes the theoretic value climb from $1.2 million to $5 million. That’s a huge (and life changing) increase of more than 4 times in the final outcome.

And the business is more saleable and attracts a different potential buyer.

And possibly tax free.

Of course, having a business “Investment Ready” does not mean that the business needs to be sold.

Far from it. Rather it puts the owners in a position of control. They can choose to sell it if the need arises or keep it and enjoy the (now) significant return that a well-structured, properly planned and tightly controlled business will yield. And the owners can go on holidays.

That strategy gives them options. And invariably a better outcome.

Many times, after designing and implementing a successful Exit Strategy program, the business is finally running well. It is making strong profits, is no longer dependant on the owners, properly structured, driving the brand, and has caught the attention of plenty of industry players.

I say, great job, the business is ready to sell. Only to be told … “Sell now? … are you crazy Chris … this is exactly what we always wanted”.

Chris Alp