Over the years, I have met with hundreds of business owners and interviewed many more on the Exit Insights podcast. These conversations have provided valuable insights into what makes for a successful business exit. Here’s a summary of what I’ve observed about those who achieve their exit goals.
About the Owners
Successful business exits often start with the mindset and preparation of the owners. Here are the key characteristics of these owners:
- Motivation and Vision: They are motivated and have a clear vision of what they want to do next. Whether it’s starting a new venture, enjoying retirement, or pursuing a passion, they know what they’re moving on to.
- Stepping Back from Operations: These owners are not entrenched in key operational roles like sales or delivery. This distance allows the business to operate independently of their daily involvement.
- Prepared and Realistic: They have prepared meticulously for the exit process and have realistic expectations around pricing and transition timelines. This preparation includes understanding the market, their business valuation, and the potential challenges they might face.
About the Business
The structure and operations of the business play a crucial role in facilitating a successful exit. Here’s what stands out:
- Functional Structure: The business has a robust structure with the right people in the right roles, doing the right things at the right times. This ensures smooth operations and continuity.
- Systematic Operations: They utilize systems that ensure consistent, repeatable, and reliable results. Standardized processes and procedures make the business attractive to potential buyers who value stability and predictability.
- Monitoring and Adjustments: There is a culture of monitoring progress against plans and making necessary adjustments. This proactive approach helps in maintaining business performance and addressing issues before they escalate.
About the Numbers
Financial health and transparency are critical for a successful exit. Here’s what successful owners do:
- Risk Mitigation: They minimize the likelihood of having to work an earnout by identifying and mitigating risks early. This involves thorough risk assessments and implementing strategies to address potential issues.
- Good Record-Keeping: They maintain impeccable record-keeping practices. Accurate and accessible financial records are crucial during the due diligence phase of an exit.
- Valuation Preparedness: The business valuation is aligned with their funding needs for the next phase of their lives. They understand the importance of a valuation that supports their post-exit plans, whether it’s retirement, a new business venture, or other financial goals.
Bonus Tip
A key element that distinguishes successfully exited businesses is their reputation. The business’s reputation is built on its proven processes for solving problems rather than relying on the individuals performing the tasks. This makes the business more appealing to buyers who are looking for sustainable and scalable operations.
Conclusion
If you’re a business owner contemplating an exit, assessing your readiness against these criteria can provide a solid foundation for a successful transition. The business sellability score is an excellent tool to gauge how prepared you are and identify areas for improvement.
By focusing on these areas, you can increase the likelihood of achieving a successful exit that meets your personal and financial goals. Remember, preparation and planning are key. Start early, stay informed, and seek expert advice to navigate the complexities of the exit process.
