Can Your SME Navigate Towards a Successful Exit Strategy?

Based on insights from the ‘Exit Like a Boss Podcast – 21-Step Challenge‘, this blog covers Step 8 –Strategy and Business Model.

Embarking on a journey toward a successful exit for your SME business requires careful navigation through the realms of strategic planning and business model development. As an astute business owner, the ultimate goal is a successful exit, but achieving that vision hinges on a seamless alignment of your strategic objectives and your chosen business model. Here, we will dissect the essential components of this alignment process, guiding you on the path to creating a well-tailored business plan that harmonizes with your exit strategy.

Setting Clear Goals

In the early stages of the process, you’ve set your exit goals – let’s say selling your business for a significant sum, like $10 million, to a listed company. Now, to accomplish this goal, you need to translate it into tangible financial targets. In this example, aiming for five times multiple on a net profit of $2 million annually is a conservative estimate. This financial foundation provides a roadmap for your strategic planning and business model.

Tailoring Your Business Model

Your business model should align with your financial target. One critical consideration is whether your business is a boutique model or a scale model. A boutique business, such as a high-end restaurant like Rockpool, thrives on a premium-based model – delivering high service, exclusive menus, and a premium price. On the other end of the spectrum is the scale model, characterized by high volume, efficiency, and a focus on speed, like the McDonald’s approach.

Avoiding the Middle Ground

Here’s the key: avoid the middle ground. Many businesses make the mistake of trying to cater to both ends of the scale simultaneously. For example, attempting to provide both volume-based services and boutique offerings can create confusion, lead to inconsistent pricing, and compromise service quality. Instead, choose one end of the spectrum that aligns with your business and focus on excelling in that area.

The further you position your business towards either extreme, the more likely you are to excel and stand out from competitors. Your business model, services, pricing, and employee skill sets should harmonize with your chosen path. For instance, if you’re aiming for a $2 million net profit, determine the volume and pricing that aligns with your model. If you’re a scale business, like McDonald’s, you need to understand how many units you need to sell daily and what staffing and operational structures are required to achieve this goal.

Executing Your Business Plan

To exit like a boss, ensure your business plan is intricately woven into your chosen business model. Every aspect, from the people you employ to your pricing strategy, needs to align with your overarching goals. Businesses that master this alignment tend to succeed, while those stuck in the middle struggle to gain traction and clarity. It’s crucial to be deliberate and focused, embracing either the boutique or scale model and tailoring your business plan accordingly.

As an SME business owner with a keen eye on a successful exit, the key lies in meticulous strategic planning and a well-aligned business model. Embrace the concept of either being a boutique or scale business and structure your business plan accordingly. The clearer your direction and adherence to your chosen model, the smoother your path towards a successful exit will be. Don’t get caught in the middle – exit like a boss by choosing the right path and executing your plan flawlessly.

This article was originally published on capitaliz.com.

Dr Craig West

Founder & Chairman | Succession Plus

Dr Craig West is a strategic accountant who has over 20 years of experience advising business owners.

With a background as an accountant in practice and two master’s degrees, Craig formed a strong view that the majority of business owners (and often their advisers) were unprepared and unaware of the steps required to prepare for exit. He then designed and documented a unique 21-Step Business Succession and Exit Planning process to assist owners and their advisers in navigating this process.

Craig now acts as a strategic business and financial mentor for mid-market business owners. Craig has written four critically acclaimed books educating business owners on employee incentives, succession planning, asset protection, and exit strategies. Additionally, he has completed doctoral research on Employee Share Ownership Plans (ESOPs) for succession.

Craig is a Member of the Forbes Business Council where he leverages his extensive experience to contribute valuable insights on helping business leaders navigate the complexities of growing and exiting their businesses.

In April 2024, the Exit Planning Institute admitted Craig to the International Exit Planning Circle of Excellence.