Growth is NOT an Exit Strategy, if the goal is to Sell your Business in the short term by Denise Hall blog image

Growth is NOT an Exit Strategy, if the goal is to Sell your Business in the short term by Denise Hall

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Yesterday, yet again, I have met with a Business Owner who hired a Business Coach to assist them with their Exit Strategy only to find the business is no better off i.e. no closer to being exit-ready 12 months later and they’ve spent a whole lot of money to boot…

Here’s the thing, from someone who deals in this space all day, every day – I have yet to meet a potential buyer who asks whether there’s a marketing and sales plan in place before they would consider buying the business. For example, it does not happen. Sure it may be in the mix of questions at some point but it only matters because of the way it is ‘sold’ to matter.

The same goes for spending a whole heap on rolling on the marketing, trying to actually increase sales (especially without the infrastructure to back it up), bringing in a General Manager (without a well-thought-out equity and game plan first), etc. And I’m yet to find an advisor who even asks if selling the business is the right thing to do for the Business Owner at this particular point in time, especially if the business features highly as their retirement funder.

An Exit Strategy, in the true sense of the phrase, to sell a business at a point in the future is about structuring the business ready for someone to want to buy it, but equally as importantly, it is about restructuring the business so that the owner can maximise their input with an impressive (and with expectations met) output.

In most cases, growth plans not executed well or quickly enough, that don’t make an instant difference, are not useful.

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The type of activities, which make up a BEST Exit Strategy (and execution) are:

  1. Clean and profitable financials for a least TWO YEARS, looking as shiny as legitimately plausible
  2. Proving that the business is making money is important, but even more is that it will continue to do so, demonstrated by how well it funds itself
  3. Establish recurring revenue models and lock them in
  4. HR agreements (and implications) are well documented and understood
  5. Signed contracts are in place and ideally have as much time on them to run as possible
  6. Evidence of 21st Century considerations in both how the business fits into the future, including processes and technology
  7. Where feasible, the business owner is NOT the centre of attention or attraction
  8. If not, what can distinguish the business as a hub as touting that “we’re good at customer service” is not nearly enough
  9. Actively demonstrate that customers will stay with the business based on gathered and documented feedback
  10. That the current owner is VERY CLEAR about what they are doing next, i.e. living their new dream, which does not involve only playing golf or going on a cruise!

Admittedly, you get these right and growth may very well follow suit, and the owner may not want to leave after all (which has happened) but growth is certainly not the starting point.

About the Author:

Denise Hall is an SME Business Value Analyst and Business Broker and is part of the Xcllusive Business Sales Melbourne Team. Denise is an experienced Exit Strategist and regularly speaks at engagements about Business Sale-Readiness and Exit Planning.  Denise is happy to talk through any of this at any time. If you want to explore what is useful and productive in an Exit Strategy in your context, please contact Xcllusive.

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Disclaimer: Chan & Naylor take no responsibility for the accuracy of any research material of contributors to our newsletter. Contributions to our newsletter are meant to be educational only and Chan & Naylor does not endorse any promotional material promoted in their articles. Readers should do their own research to determine the accuracy of their material.

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