The last of the Boomers are in their 50s now, so legions of Boomer entrepreneurs are looking at their retirement intentions and assessing their exit options. In general, they have three choices: sell outright, pass along to family or key employee(s), or close. Unless the business has been completely reliant on the skills and persona of the founder for its ongoing revenue, deciding to close at retirement is a waste of value. If you have designs on selling your business for your retirement nest egg, even if your sale is going to be to family or employees, you can maximize your future business value by choosing to scale it NOW.
Valuation of your business will take into account such things as a loyal (growing) customer base and a solid team that can run it successfully whether you are onsite or not. The value of any assets, including hard assets like buildings and/or machinery, will be thrown into the mix. Soft assets like intellectual property may be a factor. Ultimately, though, the bulk of the sale price for your business is developed by using some multiple of your annual revenue.
If scaling your business sounds like a good idea, let’s just be clear on what that means. It doesn’t mean that starting tomorrow the total agenda of your staff meetings is exhortation about “more sales, less cost”! Certainly your top line is important (to your ego, anyway) and the cost of goods sold needs to be managed. But gross revenue and gross profit are the results of actions by your team. To scale your business, you need to get after the causes of revenue and the contributors to costs of good sold.
You need an integrated framework for scaling, and to do this you need to plan on 3 years to have it fully in place. Let’s just say here, though, in case you just felt your blood pressure rise – you don’t have to figure this out on your own. There are people like US who can team up with you to install your framework.
Your leadership team
These are the folks who are going to be taking your business into the future without you, so it’s critical that individually and collectively they are a good cultural fit and tooled up. If they are not yet ready, now is the time to start getting them ready. If they are not solid A or high B-level performers, you need to figure out who can be ready. They need to be aligned around your plan for the near term and the longer term.
Culture beats strategy every time, so if you want solid performance results you need a strong, engaging culture that satisfies customers and retains top performing team members. There are so many ways to impact this, from how you communicate, your reward systems, or your reliance on authority or personal relationships while running the business. There are more ingredients than these, too numerous to detail here.
You started your business with one, and perhaps you have updated it regularly over the years. But your new intention may mean that it is high time to refresh it. Have you fully manifested the uncommon differences that your business provides to its customer base? Are you currently connected closely to the customers who love buying from you, who pay full price and recommend you to their friends? Are you managing the business with an orientation toward handling the daily fires, or with a longer focus toward fire prevention and the building of capacity?
How much prodding or “expediting” do you have to do right now to summon the performance you need to fulfill your plan? Does every corner of the business know what the priorities are, and are processes working without drama? Is your business’s execution generating industry-leading profitability? If you cannot answer an unequivocal yes you are not alone – not by a stretch. You don’t need to tolerate less than the performance you want, even if the business has been stuck for a while.
Ultimately you want to be able to extract a tidy sum of cash when you decide to retire. Is your business growing fueled by inner resources of cash thrown off by operating profit? Or is it propped up right now with a reliance on debt to provide working capital? As a prospective buyer looks at this business they will want to see the possibilities for their own dreams to be fulfilled. There are ways to accelerate your cash cycle and help you – and the next owner – sleep better at night.
You started your business because you had a vision. You might not be ready to talk about an exit plan. That’s OK. If the business is meeting your goals and providing you with daily energy and purpose, you might want to extend your timeline for your active role in it. Even if you have determined that the only way you are leaving your business is on a stretcher, wouldn’t it be great to continue to grow something great? What if you have not yet seen the true potential that your business has in store?
It’s all in there
No matter your motivation, it takes time, intention, and a proven framework like the one we use to help your business continue to move forward. Not every improvement can happen at once. Find a qualified coach to partner with you. Start in the place with the most pain or the most potential and then proceed from there until your framework is in place. It’s all in there, and the sky is still the limit for your business.