AT what stage do I employ an exit strategy?
The short answer is: The day you start or buy the business.
If you start with an understanding of the principle of seeing the
business as separate from yourself, it makes the process much
easier. If this business is a means to an end (rather than an end in
itself), the first step is to determine what that end entails.
One way to engage in this process is to set a time at the end of
each day to review the events of the day. What could I have done
better? What were the really positive aspects? What can I learn from
various events? Can I put something in place to ensure that positive
aspects become part of our modus operandi? In doing this, you need
to be totally objective about the overall performance of the business.
There’s another advantage of taking a regular objective view
of the business – you get yourself out of the way. Typically, a
business owner becomes totally immersed in the business. This is
understandable, given that the family home is mortgaged and the
whole family is reliant on its performance.) The downside is that
the business ‘becomes’ the owner and the owner ‘becomes’ the
business, and separation seems impossible. Furthermore, the owner
blames himself or herself when things go wrong.
In reality, the owner is an employee of the business, carrying
out certain functions (albeit vital functions), and they should see
themselves in this role. The question should be, ‘How did this
person perform their duties?’ rather than ‘What the heck did I
achieve today?’
The next step is to consider the options, when your current business
is no longer a part of your life – what will I do?
Buy another business in another field?
Buy a lifestyle property and work it for my own enjoyment?
Move to the coast?
Go farming?
Travel?
Once this is determined, then you are in a position to see your
current business for what it really is – a means to an end.
So, if it is to be a saleable asset, it cannot, by definition, be reliant
upon you (or any other individual). It must be a stand-alone entity
that operates successfully and profitably employing set processes
that can be replicated by a new owner. The next person will need to
feel comfortable that, as long as they follow the guidelines that you
have established, they will achieve the same level of profitability.
After all, that’s what they paid you for.
The next person may well want to change the modus operandi and
put their own stamp on the business, but they will need to know
from the start that it works the way you said it would.
It will make this asset you are growing so much easier to sell if
there are these guidelines, processes and systems firmly established.
When you buy real estate, you buy bricks and mortar and title to
a piece of land. However, with a business, tradition has it that you
are buying plant and equipment, fixtures and fittings and that vague
notional item – goodwill. That is the ‘what’ of the business; your
systems and procedures, fully documented become the ‘how’ of
the business and provide an owner with security that they can step
straight in.
If these documented processes and systems are established from day
one in your business, this becomes your basic preparation for an
exit strategy.
Along the way, it is also advisable to spend some time considering
when that time is likely to be – five, 10, 15 years down the track?
And just who is going to be the likely buyer?
An employee?
Someone with whom you currently do business?
A competitor?
If you think along these lines, you will see it as a marketing
exercise and continually present it as if it was for sale today.
It becomes a part of your strategic thinking, which should be a
continuing and regular part of the working week.
So it’s not difficult to see the great advantages in considering your
business exit strategy from day one; it will make life very much
simpler when that day arrives.
Plan your departure
right from the start
John Matthew is managing director of MBR Corporate, which offers
a range of business mentoring and coaching services, mainly
targeted at WA based SMEs, with a particular focus on businesses
based in the state’s regional areas.
Contact John on 08 9531 3777 | mob 0418 935 327 | www.
mbrcorporate.com.au