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Your business exit profitability is directly dependent upon the ability of your business to continue to operate at a sustainable or profitable level.

Business succession problems are the result of one or more of the five weaknesses that I have previously identified:

Reason #1 was strategy weaknesses.
Reason # 2 was structural faults.
Reason # 3 was situational errors.
Reason # 4, sustainability breakdown, is the subject of this post.

Three sustainability breakdowns have the potential to impact the success of your business exit, and therefore your business exit cash flow and profit.

The 3 sustainability breakdowns that cause business succession problems:

1. Family Business Continuity Problems.  In Chapter 10 of Your Business Succession the Cabernet family represents an example of the difficulties associated with business continuity when one or more co-owners want to exit, but the remaining owners wish to continue. If the owners who wish to continue do not have the financial capacity to buy the exiting parties’ shares, they can be forced to give up their life’s work.
2. Buyer Market Limitations – Barriers To Entry. The barriers to entry into your business may limit the number of potential available buyers in the marketplace. This, in turn, may delay your business exit if adequate time and planning is not applied to find a suitable successor. Main barriers to business entry include:

• licensing and registration restrictions
• financial limitations
• funding limitations
• emotional barriers
• the burden of debt

3. Failure To Recognize When It Is Time To Leave. Staying beyond a reasonable time can drive a business into ruin if you’re no longer capable of running it at peak performance. You must be truthful with yourself about when the right time is to leave if you want to exit your business with maximum cash flow and profit.

In my latest book, “Your Business Succession | How To Exit Your Business For Maximum Cash Flow And Profit” you can read three real life case studies which detail the sustainability breakdowns suffered by business owners in three very different industries, and how those issues could have been avoided with the right business exit strategy.

Your business exit strategy should cover all the relevant sustainability issues we have just identified.

In a future series I’ll share some case studies that will help you to understand the influence of each of these sustainability breakdowns in detail, so you can plan how to overcome these problems before they can have any impact on your profitable business exit.

In the meantime please feel free to take advantage of these resources to make a start on your profitable business exit strategy now:

1. Take the Business Exit Quiz (5 minutes of your time) and find out where your business exit strategy may be letting you down, and how to improve your chances of building a business for maximum profits and cash flow
2. Read my book “Your Business Succession” to discover what you want to do to ensure you will be prepared to sidestep any of the  sustainability issues outlined in this article.
3. Contact our Business Succession Strategy office to plan your business exit strategy, so we can eliminate the stress of making the right decisions for your best chance of maximizing your business valuation for a profitable exit.

To Your Profitable Business Exit,
Leigh Riley

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Strategy weaknesses impact your business succession profitability

Business succession problems are the result of one or more of the  five weaknesses I identified in my previous post 5 Reasons Business Owners Fail To Exit Their Business With Maximum Cash Flow And Profit

The first reason is strategy weaknesses.

8 key strategy weaknesses have the potential to impact the success of your business succession, and therefore your business exit cash flow and profit.

8 Strategy Weaknesses

1. When you fail to understand and respond to the laws of supply and demand in your market place, you put your business exit strategy at risk
2. If you are not thinking like a buyer when planning to sell your business, you probably haven’t prepared your business well enough to be attractive to a purchaser and therefore will fail to achieve the best selling price
3. Failing to understand that you must have evidence of  maximized business profits in order to boost your business valuation and influence the potential selling price
4. Failing to inoculate your business against Leaky Bucket Syndrome™. This is a key element to building a valuable business that will generate the business succession result that you want – maximum cash flow and profits
5. Failing to value your business properly. A proper valuation is the only way to validate the price on which you base your business exit strategy.
6. Failure to adjust your business tactics to the current economic climate. You want to take an active interest in economic matters that could impact the performance of your business, and which would enhance or detract from your business valuation.
7. Failing to be transparent about your business to a potential purchaser can undo the sale in a way that could harm your business value and your reputation. Understanding the importance of communicating the value of your business to the market place is just as vital as operating the business to capacity
8. Failing to understand that Shareholder Agreements are usually an unsuitable mechanism for handling all the issues involved with your business succession planning.

Business succession planning case studies

In a future blog series I’ll share some case studies that will help you to understand the influence of each of these weaknesses in detail, so you can plan how to overcome these problems before they can have any impact on your profitable business succession.

The right business exit strategy can put the caviar on your crackers

If you want to make sure that you have the right business strategies in place so that you can have a little (or a lot) of caviar on your crackers, then you want to take advantage of these resources to make a start on your profitable business exit strategy now:

1. Take the Business Exit Quiz (5 minutes of your time) and find out where your exit strategy may be letting you down, and how to improve your chances of building a business for maximum profits and cash flow
2. Read my book “Your Business Succession” to discover what you want to do to ensure you will not become one of the poor statistics outlined earlier in this article
3. Contact our Business Succession Strategy office to plan your business succession strategy, so you can ensure that your business does not have any strategy weaknesses that will reduce your business succession profitability.

To Your Profitable Business Exit,
Leigh Riley

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Every business owner’s dream is to eventually exit their business with maximum cash flow and profit, assuring a comfortable retirement income as a reward for their years of dedicated hard work  To achieve this you will need to maximize the price you receive when exiting if you want to enjoy the comfortable retirement you’ve been hoping for.

Alarming facts about small business owners and retirement savings

Australian statistics reveal that only 5% or retiring business owners will have sufficient retirement savings to be completely financially independent.  In the US the average retiring business person has enough savings to fund approximately 8 years of their retirement, but will on average live 17 to 18 years beyond retirement age.  Facts such as these really bring home the need to focus on succession strategies that will boost your business valuation so you can exit with maximize profits and retirement income.

5 reasons business owners miss out on maximum retirement income

While some business owners will be sufficiently prepared to reap the rewards of years of effort, the reality is that many will fail to maximize their business value in a way that could ease their financial burden during the next phase of their life.  Here are the 5 main reasons why:

1. Strategy Weaknesses involve 8 key areas of failure to have the end in mind when operating their business.  The strategic decisions made in the business do not adequately take into account market demand for the products and services they provide, nor the market conditions in which they operate. They lack a long term customer service focus, and fail to recognize the competitors they’re up against. Two types of competition exist -  competition for customers who use their services, and competition for potential purchasers of their business when they exit.
2. Structural Faults encompass 4 main areas of fault when a business lacks a management culture, and fails to understand the associated tax implications of the ownership structure of a business, particularly when exiting.  To protect yourself against structural faults I can’t emphasize strongly enough that you need to use a team of specialist advisers to collaborate and mitigate the 6 D’s of Succession.
3. Situational Errors takes into account the 6 identifiable situations that, without adequate contingency planning, can impact your business value and move your financial success beyond your control.
4. Sustainability Breakdown comprises the 3 factors that impede effective business continuity and your ability to handover your business whilst receiving full financial benefit for a lifetime of effort.
5. Steering Off Course involves leadership and management challenges and embodies the 4 business succession leadership challenges that you must overcome to ensure your business remains on track for maximum profits and income from enhanced business valuation and sale price when you exit your business.

How ready are you to take on the challenge of overcoming the 5 reasons too many business owners fail to achieve the profitable exit they had hoped for?

Business exit strategies to achieve maximum income for your retirement

1. Take the Business Exit Quiz (2 mins of your time) and find out where your exit strategy may be letting you down, and how to improve your chances of building a business for maximum profits and cash flow
2. Read my book “Your Business Succession” to discover what you want to do to ensure you will not become one of the poor statistics outlined earlier in this article
3. Contact our Business Succession Strategy office to plan your business succession strategy, so we can eliminate the stress of making the right decisions for your best chance of maximizing your business valuation for a profitable exit.

To Your Profitable Succession,

Leigh Riley

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How Is The Credit Crunch Affecting The Sale Of Your Business?

Who would have thought that a credit crunch originating in the USA would affect your ability to exit your business profitably in another country? Yet that is exactly what can happen if you are planning to sell your business without proper preparation in the form of a holistic business plan.

Despite the best efforts of governments around the world to free up credit markets, access to credit is still tight, with financial institutions carefully scrutinizing small business access to funding and therefore limiting the pool of potential buyers for your business.

If you’re a business owner who is planning to sell your business in the near future, the chances are that your ability to sell at the price you want and deserve will be directly affected by the your buyer’s capacity to obtain finance to fund the purchase.

Financial institutions are reported to be lending on business acquisitions right now, however only those businesses with proven financial viability and profitability, together with strong asset backing, will be in the running for loan approvals.  This presents a succession problem for you as a business seller who desires to exit your business in the near future.

To overcome this dilemma you want to prepare your business exit thoroughly and cover all options to ensure your sale can proceed in your timing and on your terms.  In my book ‘Your Business Succession’ due for release on 31st January 2010, I detail literally dozens of strategies to help you avoid or overcome business succession problems, and below I offer 7 strategies to help you prepare to sell your business profitably regardless of a credit crunch.

7 Strategies To Prepare Your Business For Sale In A Credit Crunch

1.  Assemble a reliable set of financial statements, prepared by your Certified Practicing Accountant, to  substantiate at least 3 years of your business performance.

2.  Increase your business cash flow with a reliable income stream.  This may mean formalizing service agreements with your customers or introducing product or service lines to increase business income.  It may also mean reviewing the pricing of the products and services you already provide.

3. Examine your business expenses and cut costs wherever possible.  Financial institutions will be looking for proven lean operations before providing funding to a potential buyer of your business.

4. Consider Vendor Finance options that enable you to facilitate the sale with potential buyers. Remember this effectively means you will become the banker on the sale, so you need to protect your interests with assets, insurance and a legal agreement.

5. Don’t forget to consider staff within your business as potential buyers. They’re in the best position to appreciate and understand the value of your business and are usually more prepared to pay the price you’re asking.  Think about arranging an Employee Share Ownership Plan (ESOP) to facilitate a buyout by your best staff.

6. Prepare a feasibility study of the future prospects and potential of your business and target market to impress financiers and save your buyers the trouble.  As the business owner, you’re in the best position to describe your competitive advantage and can best present the value that your business offers to future owners.

7. If you haven’t had time to implement the above recommendations, consider delaying selling until you can prepare adequately. If you want the best price for your business sale, forward planning in the form of a holistic succession plan is essential to ensure your business is operating at optimal profitability.

How prepared are you to sell your business for maximum cash flow and profit?

Invest just 3 minutes of your time to complete the online assessment and receive your FREE customized report with an instant explanation and “To Do List” to complete your Business Exit and Succession Plan at http://ybsProfits.com/quiz.php

To Your Profitable Business Succession,
Leigh Riley