I became a Certified Exit Planning Adviser through the Exit Planning Institute in 2012 and have been helping businesses maximise their value ever since.
Part 1: Business Checkup Every business should have a good command of the headline numbers that drive performance and it will differ for everyone. I might be biased, but I also think valuation is something business owners carry out far too infrequently. The advice I frequently give is that usually people will monitor the value of their stock, their superannuation or their investment property portfolio on a near to real-time basis, but go years or decades without going through a valuation exercise, even though the business often forms the bulk of the portfolio.
Most commonly, people do not know what the best use of their next 12 months, or 2 or 3 years is ahead of exit. That is what this part is for: gaining clarity. Part 2: Business Bio The process of listing a business on the open market for a sale is fairly regimented and routine process, but negotiations are rarely smooth sailing. I like to focus on one part of the process to start with - the one page flyer. Let's say you want to sell the business in five years. How would the one page flyer document need to look (history, the industry sector outlook, the nature of the offer and the business's legal structure) to be attractive to the purchaser you wish to sell to? What does your purchaser look like? Part 3: Personal Goals There are many things in exit planning that are simply the tightening up of things we underdo. This is one of them. Selling a business is like walking off the proverbial cliff for many owners because they have not planned their post-business life in anywhere near the level of detail they plan their business-life (and they know it subconsciously, which leads to separation anxiety, and collapsed deals). Part 4: Staff Chart This one is interesting. I am working with two clients at the moment, both turn over about $800K a year in sales, both have 5 staff and both generate net profit of about $200K a year. Now, if preparing for exit were just about the numbers, these businesses would have exactly the same hurdles to jump, but they do not. Business A is a company whose real value lies in the 30 years' worth of intellectual property accumulated (with a workforce nearing retirement age). Business B is a company whose real value relies in having a motivated and engaged mobile workforce. The latter will require much, much more emphasis on employee education, training and incentivisation (think profit share / ESOP / open book management). Part 5: Stakeholder Map Going beyond the employees, how are customers, suppliers, the owners' family and yes, even the advisory team affected by a proposed exit strategy? It is worth thinking it through and preparing for any contingencies. Part 6: Risk reduction Most people are comfortable with the profit x multiple approach to valuation and think the multiple is industry-based. It kind of is, but isn't really. It's more an expression of risk. The more business risks you can identify and the more comprehensively you can manage, document and mitigate them the more influence you will have over your multiple. Part 7: Growth Matrix One of my favourites - this is where you can really apply some strategic effort to drive both the valuation and the likelihood of a sale. Not all forms of business growth are equal. Many advisers talk about the need to leave some meat on the bone for your purchaser (value potential) and I am a subscriber to that school of thought. If you are able to lay out a fully-costed, fully-analysed case for growth a handful of growth scenarios, (properly I mean, not just a "just turn up the ad spend on Facebook and watch the dollars come in!" throwaway), you will subtly demonstrate to your buyer a couple of things - A, you're seriously looking out for them if they do purchase, and B - they're going to miss out on something special if they don't. Part 8: Data Mining One of the hardest projects of all. I was consulting to an accounting firm a few years ago and their motto, all over their website and marketing collateral was "growing your business, is our business." Except, when I marshalled the actual data into a spreadsheet, their client base's combined sales had declined from $35M to $30M in 3 years in a bull market while a lot of resources were being devoted into non-core services like estate planning. Facts like this are very hard to look in the face, but you must do it well before your buyer does if you would like a smooth transaction. Part 9: Value Stream Map Some classical operations analysis for efficiencies. There's reams of information on this area, I won't add to it. Part 10: Breadcrumb Trail What is the path your customers walk to reach you? Do you have visibility over exactly who and how many are in each stage of your funnel? Are you constantly refining your process to move them down the funnel in an orderly and predictable manner? Are you making good use of digital marketing? Part 11: Exit Options Did you know there isn't just sale, there's more like 8? As exit options go, that's actually one of the more stressful and lower success probability routes. Worth a proper review with a professional trained in the topic. Part 12: Dry Run Exit is a little like an important golf shot, a practice swing is unlikely to hurt.