Whether you plan for it or not, you will eventually exit your business. But like most owners, you must concern yourself with running your business today. As busy as you are, I encourage you to take a few minutes to see how a well-planned exit can have a very positive impact on your current business.
When building a business with the end in mind, it’s not enough to just grow revenues or make more money each year. How you get there becomes as important as the results, because exit planning holds your business up to a brighter light. It forces you to consider not only what you and the business need today, but also what is needed in the future. Taking action to meet those needs creates a potentially better business today.
Assume that we are speaking with an owner who wants to sell his business for the maximum value to a third party. He is pleased to announce that revenues are up 25 percent over prior year. The buyer is likely to say “Great, how did you do this?”
The owner’s answer will impact how much the buyer is willing to pay for the business. Assume the answer is something along these lines: “Well, most of the clients know me and have worked with me for a long time. Over the last few years I have really focused on sales, so revenues are up.”
Hearing this answer, that buyer is probably reducing in his head the price he is willing to pay. Contrast the first hypothetical answer with this “fine-tuned” second: “Well, our business development team—headed up by our bright, young VP of Sales—has really established a competitive edge in core markets. Several years of effort are just starting to take off.”
This second answer is probably increasing the business’s price with every passing minute. In both answers, sales were up 25 percent. Yet the revenue increases were accomplished quite differently. In the first answer, results were tied to the owner’s efforts. If that owner exited the business, or just got tired of going on sales calls, it appears much of that revenue could be lost. The second answer unquestionably reveals a better business. That business will grow without its owner going on sales calls and has established competitive advantages that a buyer can build upon.