“Repetition is the mother of learning, the father of action, which makes it the architect of accomplishment.” Zig Ziglar
All too often, we need to hear things multiple times before they sink, particularly in the context of the sheer volume of communication noise we are faced with on a daily basis. So whilst I have previously been reluctant to repeat myself in posts – preferring to only put pen to paper (as it were) when I had something new to share – it stands to reason that readers will gain greater value from hearing messages more than once. This repetition is where the greatest learning is achieved, which leads to greater understanding and – hopefully – positive action.
So with that in mind, consider the following insights I consider the most vital when preparing for the inevitable transition of ownership of your business:
- It takes time. Preparing a business for ownership transition takes many months, sometimes years, so it is important that you factor this in to your exit strategy. An unprepared business will not only suffer from a lower value due to its increased risk profile, but might not sell at all when the time comes. The volume of Baby Boomer-owned businesses suggests that many thousands will be seeking a buyer in the years to come; the market of potential acquirers is simply not big enough to meet the demand.
- Have an “asset mindset”. Rather than looking at your enterprise simply as a business, take the view that it is a financial asset that you are creating for the market of buyers of such financial assets. That means your primary considerations become sustainability, cash flow, ROI, and other such metrics. The global market for financial assets is enormous, and any proposition needs to stack up favourably against others competing for the investor dollar.
- Eliminate “owner-dependence”. SMEs in particular are, more often than not, heavily dependent upon their owner/s for performance and sustainability. The business’ DNA is often inextricably entwined with that of its owner/s, in which case a change in ownership is a clear and present danger to its sustainability and transferability. It’s difficult, but removing yourself from day-to-day operations and decision-making should have nothing but upside when it comes to exit.
- Know thy buyer. When preparing a business for ownership transition, you need to know who you’re preparing it for. Are you seeking a sale to a competitor? Staff, via a management buyout? An existing partner of the business? IPO? An international concern seeking expansion in your market? If you can be clear on who you intend to sell to, this will underpin every strategic decision you make moving forward and ensure every action has a defined outcome aligned with your endgame.
- Surround yourself with a great team. The most saleable businesses are those with a solid management structure that has reduced the reliance on departing shareholders, so hiring decisions in the executive ranks are key. Your external team should also be top-notch, and when considering preparation for sale, your accountant, commercial lawyer, tax adviser and business broker are key to your future success.
These are probably the top five, high-value insights, but it’s also worth mentioning that to truly stand out and offer the greatest appeal to potential acquirers, some boldness would not go astray. Larger organisations are almost always more appealing and sustainable than their smaller counterparts, so consider how your business could scale up via acquisition, JVs, merger or even licensing/franchising.
There are plenty of other insights I could share (in fact there are 101 in my book On Your Terms!) so please do not hesitate to reach out via phone or email to find out more.