I was listening to my iPod when I read the news of Steve Jobs passing earlier today due to pancreatic cancer.  It rocked me, at the sad loss to his family and the company he’d built over 30 years of his 56 years of life.

But Did Steve Really Die?

I’m not trying to be glib about such a sad event in history, but I am serious with my belief that Steve lives on because of the incredible legacy he has left to the world with his creations.  Steve not only placed his very own special mark on the Apple company that is now a world-wide household name, his legend will continue for generations ahead.

At age 21, he started Apple with two colleagues from his parents garage with minimal start up capital.  They dreamed big, then made those dreams a reality. A business rollercoaster unfolded, with mistakes made and disputes unravelling a power struggle that forced Steve out of the company in 1985.  Never being one to be held back, Steve forged forward developing the animation studio Pixar that he acquired, and in 1997 returned to Apple, completely turning around the then struggling company, boosting its value off the charts.

The resurgence of Apple under Steve Job’s vision and management saw it become the USA’s most successful company with more cash than the US government, but it is the innovation that has completely revolutionised the computer world that resonates most.

Steve understood very well the impact of succession, continuity and legacy.  He has exited from Apple twice.  The first time proved to almost be the company’s demise, but the second time around, he’d learned the lessons and this time he built it for continuity. He knew how to boost his business by reaching for the stars, but also how to inspire a team to follow on and implement to make it all a reality.  I say that Steve lives on through his legacy, as he will go down in history as having been an inspiration to all entrepreneurs with a dream and as having had a lasting profound impact on society for decades to come.

My team “The Exit Experts” send our most sincere and heart-felt condolences to Steve’s wife and 4 children whose loss must seem indescribable right now.  Steve’s body may rest in peace, but his legacy continues on.

The Ultimate Succession Plan

For me Steve has become the guidepost for what I would term the ultimate ideal business ’continuity strategy’, because there aren’t too many phenomenal leaders that can leave their post without so much as a hint of financial hitch in sight like Steve has.

What are you doing today that will build your business legacy so it can continue on well after you exit?

Here’s to your successful business exit!

Leigh Riley

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.

Here’s the first three key points that buyers are looking for:

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

Leigh Riley

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Prescription for business succession disaster!

Bill and Ben were equal-share directors of a profitable medical supplies distribution business for ten years. They estimated the business value at around one million dollars. When Ben suddenly died in a car accident, Bill thought he would automatically borrow to buy out Ben’s shares from Ben’s beneficiaries, but he faced a number of unexpected problems.

• Problem 1: Ben’s estate attorney arranged a business valuation to determine the value of Ben’s ownership for distribution to his estate, revealing that the business value had grown to $1.5 million. For Bill to buy Ben’s shares, he would need to borrow $750,000.

• Problem 2: Although the business was going well (with both directors operating it), Bill struggled to find adequate finance (the maximum he could borrow was $350,000) because his personal debt commitments were significant and he had forgotten the business had previously provided personal guarantee security against a mortgage for Ben’s family home.

• Problem 3: Ben’s wife, who didn’t work, needed the money from the business to pay off the mortgage and meet other family expenses, so was applying legal pressure to Bill to do something to release some cash.

• Problem 4: Bill was extremely traumatised by the loss of his long-term working partner and the resulting financial challenges. The situation took months to resolve and affected the business operations in a way that negatively impacted sales fulfillment, which was predominantly Ben’s area of strength in the business. Customers became disgruntled and began purchasing from competitors, which in turn affected sales, cash flow and ultimately the business value.

• Problem 5: Ben’s eldest son Tom had been working in the business as a storeman, and felt he was entitled to move into Ben’s role automatically as a beneficiary to the estate. Although Bill had tolerated Tom working under Ben’s charge while he was alive, Bill could not entertain the idea of working directly with Tom because he was too inexperienced. On top of that, Bill had always found Tom to be spoiled, immature and irresponsible, so considered him to be an undesirable working partner or co¬owner.

• Problem 6: Bill was desperate to find another equity partner, but aside from Tom, no candidates presented. Bill was not able to form an agreeable arrangement with Ben’s widow, who was represented by strong legal counsel. The situation had become quite acrimonious and Bill was forced to sell the business. The business sold 18 months later for $1.1 million, some $400,000 less than its valuation immediately after Ben’s death.

A poor succession outcome for Bill

Bill had lost a large part of his life’s work through his inability to arrange capital funding to take full ownership of the business when Ben died. This was a heartbreaking loss from which he took years to recover.

Although Bill and Ben were excellent business people in so many ways, they made an enormous error of judgement by failing to plan certain aspects of their business that were essential to ongoing good management. During all their previous business planning sessions, they had never discussed a succession plan or taken the simple steps that could have easily prevented the stress and heartache that Bill, Ben’s widow, and Tom all endured.

How to prevent the forced sale of your business

1. Implement thorough succession planning measures, such as forming an agreement that contains funding mechanisms to release owners from debt and guarantee commitments, to ensure that all owners remain in a strong position to negotiate a sale no matter what the circumstances.
2. Educate yourself - read in detail about what Bill and Ben could have done to prevent this situation in the solution suggestions in Part 5 of my book “Your Business Succession: How To Exit Your Business With Maximum Cash Flow & Profits”
3. Conduct a FREE self-assessment of your readiness to exit your business profitably under any circumstances at www.BusinessExitQuiz.com

To Your Profitable Business Exit,
Leigh Riley

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How your family’s health can impact on your business exit profits…

In this series, I am revealing 6 of the Situational Errors that can prevent your business from capitalising when you exit your business at any stage, particularly when the exit is beyond your control. My previous post revealed the first of these situations, where Brian, the owner of a Mechanic workshop, had made an error in judgement about succession planning.  He did not see the need to implement a business exit strategy because retirement seemed a long way off at his age. Unfortunately he developed a severe illness which forced him to exit his business at a very young age, causing financial hardship for his family and job loss to his employee.

In this post I’m going to insist that you don’t limit your thinking to how your own health can impact the continued viability of your business, because this would also be an error of judgement. In my book “Your Business Succession” Case Study # 8 discloses how Judy’s profitable, home based clothing manufacturing business was forced to a grinding halt because her child was diagnosed with leukemia and in need of constant, ongoing care.

How prepared is your business to enable you to care for a sick child?

Judy had some very capable employees, but none were driven or talented enough to run the business without her leadership.

The smaller your business, the more vulnerable it can be if you have to exit early

The smaller your business, the more vulnerable it can be, so structuring your business with an exit strategy for diverse situations is essential if you want to maintain financial viability in the face of the unexpected.  Now you have read about two situations where the business owners thought succession planning was only for people about to retire.  Each had no way of knowing they would soon be forced from their business well before retirement age due to situations beyond their control.   Don’t leave your business exit strategy to chance. Make sure you’re in a position to profit – no matter what the situation!

Business succession solutions

Succession solutions exist for all business ownership structures.  A typical small business exit strategy involves arranging a formal Buy-sell agreement with another interested party. This could be with an employee or a colleague already operating in your industry.

For dozens of tips and detailed case studies to kick start your successful business exit strategy  and invest in your future you want to read the book “Your Business Succession…how to enter, exit and execute your business for maximum cash flow and profit”.  If you don’t find a solution to help you with your business exit plan, I will happily refund the purchase price!

How well prepared are you to exit your business with maximum cash flow and profit?

Take the FREE Business Exit Quiz, and receive your own customised report which will reveal the strengths of your business exit plan and uncover any shortcoming that you must address if you want to maximise your profitable outcome from your business when you exit  – through any circumstances.

Here’s to your profitable business exit!
Leigh Riley

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The headlines read ‘Earth and Venus may collide’!  If that is your latest reason not to take action on growing your business value and arranging your business exit plan, think again!

There is a one-in-2500 chance of Earth and Venus colliding.  But there is a 100% chance of you leaving your business one day… whether you choose to or not, it’s inevitable, so isn’t it time to face facts, stop making excuses and start on your business succession plan?

Leaving your business is lot less scary than the thought of planet Earth crashing into Venus.  You and I both know that if you’re the type to look for reasons not to get things done, there’ll be another reason waiting in the wings to justify your inaction.  If this possible threat is just a distraction from reality for you, then wake up and start on your business exit plan now.

Taking simple action will add value to your business, because you’ll present it in its best light, making it more appealing to potential to buyers.  When you are preparing to sell your car – you clean, polish and service it, and you obtain a mechanic’s report to verify its reliability.  These simple actions certainly add value to the car because buyers will pay more for the beautifully presented vehicle in great mechanical condition.

Practical business exit plan steps you can take right now

Similarly with your business, you need it to be in top condition to maximize its value.  Preparing to exit your business is similar, but it takes a bit more time and effort. Here are five practical steps you can take right away to start the process of maximizing your business value:

1. Keep your premises clean and tidy
2. Maintain your equipment, stock and tools in good order
3. Document all your systems
4. Ensure your staff are well trained in the day to day processes of your business
5. Verify the profitability of your business with an accountant’s financial reports for at least 2 years

FREE help to start on your business exit plan now

Take the FREE business succession readiness assessment that I designed to support you and readers of my acclaimed book ‘Your Business Succession’ How To Enter, Execute And Exit Your Business For Maximum Cash Flow And Profit.

You need to invest only 3 minutes of your time to complete the free assessment…. And you’ll receive a customized ‘to do list’ of the main actions you want to take to get started on your business succession plan. You have nothing to lose and much to gain … so take the quiz now

Take the quiz

How well prepared are you for planned or unplanned business succession? Share your story or your experience with the quiz on the comments box below.

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