If you’re thinking you might like to exit your business this year, there are a few things you will want to pay attention to in preparation of your business exit strategy.
Check out this article published in My Business Magazine to learn more.
Here’s to your profitable business exit!
Leigh Riley
I’ve not revealed this before, but earlier this year I was invited to be on the panel of judges for the “ActionCoach My Business Magazine Awards”. I felt it was a great honour to be asked so could not refuse the request. The task was not easy for many reasons. The number of entrants was significant and thousands of pages of data had to be considered carefully to form an assessment of each candidate. With most being of such an incredibly high standard, this truly made the task for judges very difficult. Amazingly though, most of us formed a fairly similar opinion of those candidates that really stood out from the crowd.
It got me thinking about how important it is to stand out from the crowd when you’re in business, and not just to win competitions. It demonstrated to me yet again, that it’s no accident when a business is successful. It does become obvious to everyone when you stand out from others in business, and there is a lesson in it for each of us in business.
As a follower and regular reader of this blog, you already know that I bang the drum (rather loudly) about business succession, and I do so because you are operating a business that I know you will one day hope to sell. You’re working hard building an asset, and often you’re so hard working ‘in’ it, that you can overlook working ‘on’ it.
I want to see my followers succeed and stand out from the crowd, especially the crowd that is gathering around the ‘for sale’ post. I’m referring to the tsunami I mention in my book “Your Business Succession”, because the average demographic age group of small to medium sized business owners are so near to retirement and are looking for ways to extract their equity to move on to another phase in their life. With so many about to do this (80% in the next 5 to 10 years) there will be quite a crowd of businesses selling. It will become a buyer’s market and only those that ’stand out’ from the crowd will gain the most when they exit.
You Business Succession
Leigh Riley
Now before you zone out because you think you’re too young for formal exit strategies and succession plans to matter, think about these two very important points:
The reason I’ve commenced a series of FREE educational webinars, is so you can see what you can do to ’stand out’ and make the difference for maximised cash flow and profits, with an enhanced business valuation and a strategy to ensure you get paid what you deserve for your lifetime of effort in business, through most circumstances.
I’m pleased to reveal the finalists have been chosen for the ‘ActionCoach My Business Awards’ . You may see those that ’stood out’ for yourself by clicking here.
Here’s to your business success and profitable exit!
Increase Your Business Acquisition Attractiveness by:
If you haven’t already done so, make sure you register yourself to attend the FREE Webinar I’m running so you can learn all you need to know about how to BOOST your Business Valuation. I’ll be interviewing Business Valuation Guru, Sean Hutchinson live from San Francisco. Sean excels in explaining the levers you can control to increase your business valuation and I’m very certain you will learn a lot from listening to him. Register for
Date: Thursday 8th September, 2011
Time: 11.30am
Register Now for the FREE webinar at http://yourbusinesssuccession.com/bizval-webinar1.php
You can’t afford to miss this opportunity to learn all you can about how to BOOST your business profits and valuation.
Here’s to Your Profitable Business Exit!
Here is a taste-test of some of the items to be covered in the FREE Webinar I’m running on:
Date: Thursday 8th September, 2011
Time: 11.30am
You will discover how to BOOST your Business Valuation when I interview Business Guru, Sean Hutchinson, live from San Francisco. Sean is sensational at explaining the levers you can control to increase your business valuation. You can Register Now for your place at the FREE webinar at http://yourbusinesssuccession.com/bizval-webinar.php
In this post, we will discuss How can you Increase Earnings in a way that increases your business market valuation? Here’s how:
Timely Factors: don’t leave it ’til the 11th hour
Understanding fully the levers that you can control and manoevering them to boost your business valuation, can take time. For some strange reason, business people too often think they don’t need to worry about it until the moment before they exit. Here are the important reasons why that’s faulty thinking:
More than half of business owners will be forced from their business due to factors they could not have imagined (statistics show 51% leave due to sudden and unplanned events).
This means you are forced to be a ‘price taker’ and to accept whatever is offered without question.
The time it takes to build a business of value means it is not something you can leave to the last minute or just prior to exiting.
In the next post of this series, stay tuned for: “How Can You Increase Earnings in a way that increases your business market valuation”, I’m going to reveal the 6 risks you must overcome in your business if you are to increase your business market valuation. You’re going to be surprised at how large a part mitigating risk in your business will BOOST and contribute to your business valuation.
Until then, make sure you register for your FREE place at the Webinar to be held on Thursday 8th Septemeber 2011 at 11.30am. You can’t afford to miss this opportunity to learn all you can about how to BOOST your business profits and valuation.
Here’s to Your Profitable Business Exit!
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So if you’ve been signed onto my blogs recently, you’d be aware that I’ve been in the USA learning all that I can about the latest exit planning strategies at an MBA style intensive program run at the University of Chicago. I’m pleased to report that I passed the exam which means I’m now able to put more letters after my name as a qualified CEPA®, but the best bit was that I learned a lot, and I met a lot of great people too. I’ve also been indoctinated into the Institute of Exit Planners.
Surprisingly, there are not a lot of people in the world specialising in Succession Planning, and at the risk of sounding a bit precious, I’m kind of one of a very unique group in the world. In Australia, that group is especially unique and tiny, because there are only four Aussies with this qualification, and three of them were at the training with me. What does that mean for you? Well it’s something to be aware of when you seek out your succession support, because there may be some people posing as professionals in the area of succession planning, but if they aren’t formally qualified, you’d have to wonder how good their services and advice will be to you.
There is a lot to consider with your business exit plan, and the statistics are not good for Aussies, who have so often failed to plan for the important succession event that will inevitably happen in their business.
If you need to know what to do to get started, download some free chapters from my book: Your Business Succession and sign up for my regular blog to receive lots of helpful and handy business exit planning tips.
Leigh Riley M Bus, Certified Exit Planning Advisor® (CEPA®), DFP, Cert IV A & WT
Consultant Business Succession Strategist, Author, Speaker, Trainer
I think it is bad enough to close your Business doors because you can’t sell, but consider this GPs story.
Dr Francis had served his community in a Practice established over 30 years. With no business operational skills learned throughout Medical School, Dr Francis was like many of his peers: a very good doctor concerned for his patient’s welfare, with little interest in the business matters of his private Practice. Honourable as that may seem, it did not serve him well. Nor did it serve his loyal staff or the patients he’d so diligently cared for over 3 decades. When he was eventually forced to exit due to ill health, and a new owner could not be found for his Practice, his only option was to close his doors.
1. His staff were adversely affected being suddenly without jobs
2. His community was impacted heavily due to loss of his valuable services
3. His personal finances were hit hard, because not only did he not receive any financial consideration for his lifetime of efforts, but he had to meet an obligation owed to staff for long service leave payments and other entitlements. The insult to injury was that it meant he must pay out money to leave his Practice.
Here’s to Your Profitable Exit!
Businesses: 6% Will Close Without Selling (ATO)
In Australia, that equates to about 120,000 businesses a year that do not sell, with owners simply closing their doors. Alarmingly, this statistic is rising due to the large amount of businesses that are not adequately prepared for the issues they will face when the time comes to leave. They haven’t built their business as a valuable asset with a Business Selling Strategy. Escaping these statistics is easier than you may think.
75% Have No Succession Plan
The 3 top reasons business owners like yourself state as why they haven’t implemented a formal exit strategy is because
The Number of Business Owner’s that will Leave Due to Unplanned Circumstances is 51%
Business owners always believe they will choose the time when they will leave…..but in doing so, they lose control when they overlook the 6 Succession Triggers and fail to understand that only 2 of these can be controlled. The other 4 exit triggers will adversely affect them, impacting heavily on their financial outcome when they exit from their business. It doesn’t have to be that way.
How Do You Escape and Overcome the Succession Statistics?
I can’t cover all the ways for you here in a short blog post, but I can share a lot more techniques in the books, and also in a FREE Webinar. If you are serious about your business direction, have a goal for the way you see it developing as a valuable asset that you can one day sell, you can’t afford to miss the opportunity. Sign up for the FREE Webinar to learn how! You can do this by emailing your interest to my office at support@ybsprofits.com or call 1300 499 225 or (03) 9584 5099 to book your place. The session will be on 21 June 2011 and they will run in two timeslots, 2pm or 7pm for 45 minutes each.
Here’s to Your Profitable Exit Strategy!
I’m blogging to you from New York City and about to reveal the last 3 important reasons to think like a buyer when you sell your business. These are the points I emphasized to the editor of Inc Magazine (USA) when I was asked to list the things a buyer should look for when buying a business (these follow on from the previous two blogs)
Scenes form New York City: Columbus Circle in Manhattan
8.Systems and Processes
Buyers will want to check out the way your business operates as this will provide an indication of efficiencies. If it is a turnkey operation that anyone can run; and there are established, up to date training manuals, and all staff clear about their role in the business, buyers will pay a premium for that, so it makes sense to ensure you provide this if you are to profit the way you had hoped when you leave your business. If not, be prepared to have a buyer beat you down on price.
9.Leases, Plant, Equipment and; Machinery
Terms and life of leases of your business operation are essential so buyers will scrutinize these carefully. You want to make sure there are reasonable and long term leases in place to protect the continuity of the business operation. Operational equipment must be in good order, or else a buyer will be turned off believing they may be burdened with the need to inject immediate capital to upgrade for future efficiency of the business. Tired equipment, plant and machinery can be a massive drain on profitability, so sort it out before you sell, otherwise you can expect this to be reasoning to beat down your business price.
10.Exit Planning Prospects for the future
I know you’re thinking “why would it be important to a buyer to consider their exit strategy on a business they’re about to buy and probably not planning on leaving for some time?” It’s good question, but definitely don’t discount it because buyers today are thinking to start with the end in mind. That’s because the informed buyers knows one day they will want to also sell for a maximum price. The informed buyer also knows they may not always choose when they leave because unplanned events such as dispute, divorce, disability and death are a lot more common than is thought. You can help by thinking about the exit options for them, and one way to demonstrate this is to have your own exit strategy clearly mapped out. Financiers are now also asking for this information before they lend money on the acquisitions, so it really is in your interests to have this sorted out before you sell. On top of that, it will help you because what if circumstances force you out unexpectedly? Is this a business you are going to be able to off load quickly if you need to, and at a price that is satisfactory to you. If it’s a business that requires special interest or skills, you better start thinking about it now, before you sell, so you don’t get caught out and left strapped for cash.
You can read a lot more about these points I make in the book “Your Business Succession, how to enter, execute and exit your business for maximum cash flow and profit”
Here’s to Your Profitable Business Exit!
I’m currently in New York City and when Inc Magazine (USA) asked me to comment on what a buyer should look for when buying a business, following on from my previous blog, here’s 4 more things I told them.
View from my rooftop of NYC – Manhattan Skyline
Where is your business positioned in the marketplace? Does it dominate a particular niche or is it floundering in the fringes?
4. Marketing
Understand the purpose and motivation of why a buyer may want to purchase your business as this will enable you to use it to your advantage. Let’s say you have a business that is uniquely positioned in a manner that could provide a competitor with the competitive advantage they long for. This could be a strategy for you to build upon toward your business exit plan and develop a superior sale price.
On the other hand if your business is just coasting along but you have identified ways to improve the performance quickly, you can offer to demonstrate this to a a potential buyer, so you may retain their interest and prevent them from insisting on a reduction in sale price.
5. Ownership Structure
This is important to you as a seller particularly in relation to taxation and a buyer in terms of future ability to raise funds for expansion plans. A seller may need to go to the expense of restructuring to ensure they’re in the best position to profit after tax. This is something you must consider before you sell with the advice from a CPA.
6. Buying the shares versus the business
Sellers are usually advantaged by selling shares of a company (under Australian Tax Law) rather than the business itself, but if a buyer accepts this, they take on the liability factors of the company that could impact them adversely in the future, so they are generally reluctant to agree to this. One way to mitigate this risk for the buyer and encourage them to buy the shares for your benefit is to provide sale terms with ‘run off’ professional, product and public liability cover (funded by you as the seller) to protect their acquisition with insurance.
7. Management and Organizational Chart
Buyers are looking for a business that’s viability is not dependent on too much of their own physical effort. As a seller your business will be more attractive to a buyer when you can demonstrate the management and responsibility structure with an organisational chart to show who in the company has the rainmaking responsibilities versus the operational tasks. A clearly defined structure indicating little or no owner reliance can provide some comfort. Further to this, show how your key employees are remunerated with attractive employment contracts ensuring staff retention when you leave. You don’t want the buyer to have any fears about the key income generating staff leaving due to a change in ownership. Remember you’re not just selling your business; you’re buying selling everything that make the business work which may or may not include the staff.
So there you have 4 more good reasons to think like a buyer when you sell. In the next blog, I’ll reveal the last 3 which may arguably be the deal makers or deal breakers for the successful sale of your business.
Here’s to your profitable business exit!
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I am so excited to report that I successfully passed the Chicago Uni CEPA program which means I am now a fully qualified Certified Exit Planner and indoctrinated into the USA industry body known as CEPA.
Class photo from Chicago Uni – CEPA Program
To reward myself I decided on a quick trip to New York City where i was asked by the editor of Inc Magazine USA to contribute to an article about what buyers should look for when buying a business. Over the next three blogs, I’m going to tell you everything that I told them, and this is important for you to take notes, because understanding what a buyer looks for when purchasing a business does effect you. As a seller, you can make sure your business looks exactly like the type of business a buyer would want, and in doing so, your business will become the business that stands out in the crowd, and can command a premium price. That translates to a future set for financial security.
1. Proven Financial Stability and Profitability
Buyers will want to check the historical performance of your business before they purchase and will verify reports against lodged tax statements. They want to check out your business debt exposure and understand the debtors (money owed to the business by customers) and creditors (money the business owes to suppliers etc). If buyers are applying for finance to fund the purchase, banks will require this as part of their due diligence before they will approve a loan. If banks won’t lend, buyers may look to you to provide some assistance with Vendor Finance terms or some other financing mechanism, so you’ll need to be prepared for this. Financial data will give buyers a good understanding of how well your business has been managed financially, and enable them to gauge the ability of the business to borrow for expansion and capital improvements. Shrewd Buyers know the past is not always a good measure for the future, so make sure you offer your business plan to indicate a clear direction for the future of your business.
2. Future Prospects and Forecasts
There are many businesses that have performed well in the past, but the future looks grim for them due to technological advancements or changes in demand and market trends. You would be wise to provide some evidence of the future market conditions. If you are not sure why this matters, think about what iPods and iTunes have done to CD sales and you may have some idea of how trends can impact heavily on the future financial viability of the business. Understanding your business future prospects together with a legitimate reason for selling can be a huge bonus in securing a buyer for your business. Take the time to research future prospects for your business so that buyers are secure in avoiding a dead end acquisition.
3. Client Concentration
Consider where the main income of your business comes from and how much exposure it has to each client. If your business receives more than 20% of its income from one source or customer, this is risky for the buyer especially if there are no service contract in place to protect the revenue source when you leave. Everyone knows that when there is a change of management or ownership, there is a possibility of client loss, so take steps to ensure the income your business generates is secured with contracts, and that income sources are sufficiently diversified. Income sources that are too heavily concentrated in one area, leave you open to the buyer haggling on your business price.
Like I keep saying, you need to think like a buyer when you sell, because it will help you to position yourself for strength and financial reward.
Here’s to your successful exit strategy
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Leigh Riley, author of "Your Business Succession", provides strategic, tactical, practical and educational support for business owners who want to exit their business with maximum cash flow and profits. For speaking engagements or Succession Plan Audits contact Leigh here. |
