Small business BIG growth®
Words by John Di Natale, BIGthink! Managing Director
Can someone show me the way out?
Imagine I’m your coach. Let’s say your fitness coach; and my instructions when you start training are, “OK RUN!”
You’d probably ask a few questions before you headed off down the track. Questions like, “well, how far?” or “for how long?” or simply “why?” Why is it then, that many franchisees and business owners start “running” and really don’t know where they’re headed or what they’re ultimately trying to achieve.
You’ve heard it before no doubt. Peter Drucker’s “start with the end in mind” has been tossed around countless times and yet, most business owners don’t have a have a clear plan for their exit. Planning for your exit or the sale of your business is a process, just like planning a marketing and promotion campaign or your staff training program. The difference is that this plan is the one most likely to deliver the greatest value. We’ve seen on many occasions that the exit is where the greatest value is created. Think of companies like Flickr that was sold after eighteen months for $30 million, and YouTube had just turned two when it was sold for $1.6 billion. Now you may not be on quite the same scale (yet) with your business but the principles are the same.
In simple terms, you put your time in and that gives you a return. That is how you create an income. You also put your capital in and you get that back when you sell – and with some good planning it should be significantly more than you put in. That is how you build wealth. Without a focus on the wealth creation aspect, you risk getting to the point where you want to make your exit but there is nothing that can be turned into cash at anywhere near the value you were “hoping” for.
So what’s your plan?
Are you growing your business to maximise profit and therefore sale value in three years time, or are you in to pull as much money out of the business as possible to support a lifestyle. Both are valid approaches but likely to lead to very different outcomes at sale time.
Your exit strategy doesn’t necessarily have to be complex. It could be as simple as this; build the business and sell it in 3 years time for $1.5 million dollars. When you have the big picture clearly defined, the smaller things tend to fall more easily into place.
If your plan is to maximise asset value when you sell (and shouldn’t that be everybody’s plan?) there are a few key areas to focus on that will help you get there:
- Develop your team so the business is not entirely dependent on you. If it is, it won’t be worth as much when you leave.
- Ensure that you follow the systems and processes that create the right customer experience and protect your brand
- Maintain accurate and up-to-date financial records
- Keep the end game firmly in mind!
Getting these things right will contribute to maximising the asset value of your business, so that when it comes time for you to ‘exit stage left’, you leave with much more than a round of applause.
JOHN DI NATALE
John is the Managing Director and Founder of BIGthink! and Axis Advisory. He has broad international business experience in franchising and is in demand as a business advisor and conference speaker. John is passionate about helping entrepreneurs and small businesses think BIG, and fast-track their growth journey!