Podcasts
Exit Options: How to Choose the Right Path for Your Business with Len Bruskiewitz
Preparing for your business exit can be overwhelming, especially when you consider all the options available. In the latest episode of the Exit Insights podcast, Darryl Bates-Brownsword and exit planning specialist Len Bruskiewitz dig into the different ways you can exit your business, from family succession and management buyouts to strategic third-party sales.
Len highlights the importance of starting early—ideally, two to five years before you plan to exit. With this window, business owners have time to work on improving financials, building a strong leadership team, and reducing dependence on themselves. As Len explains, the goal is to make your business run so smoothly that a potential buyer sees value in acquiring it.
Key Takeaways:
- Understand Your Options: Knowing the pros and cons of internal and external exit strategies will help you choose the right path. Len explains why family successions can be challenging and why third-party sales typically offer higher upfront payments.
- Work Towards Independence: Len emphasises that an exit-ready business is one that doesn’t rely on the owner to function. He suggests gradually stepping back from day-to-day roles, allowing your leadership team to manage operations independently.
- Boost Valuation by Planning Ahead: Len points out that businesses prepared for sale can achieve valuations up to three times their starting value. Planning early can lead to game-changing financial outcomes.
Watch the episode here:
Welcome to the podcast that’s dedicated to helping business owners to prepare for exit so that you can then maximise your valuation and exit on your terms. This is the Exit Insights podcast presented by Succession Plus. I’m Darryl Bates-Brownsword. And today I have a fellow exit planner joining us. Len Bruskiewicz. Thanks for joining me on the show today.
Thanks for having me. I’m really excited to be here.
Yeah, it’s a good one we’ve got lined up today. And even though we’ve done quite a number of episodes already, we haven’t specifically addressed the topic of exit options. What are some of the exit options available to you as a business owner when you are thinking about exit, when you first start to get that itch, I guess of, hey, look, I’m ready to move on from this business. And there’s always a number of reasons and motivators that I guess drive business owners to want to move on, but let’s dig into what some of those things are, shall we?
Yeah, that sounds great.
So then as I guess, look, there’s a number of options, isn’t there? I guess we hear about the dreaded D’s that are available and that is the old death divorce and don’t come Monday. When we basically walk away from our business because of, know, we didn’t plan an exit. We didn’t plan what would happen next if we, if for whatever reason we can’t show up. And sometimes the business just folds. Now, sometimes that folding is unplanned and accidental and not desired. But are there any times in your experience, and I guess, you know, just to set the scene a bit more, we’re starting from, guess, perhaps the least attractive exit options and maybe we’ll work out from there. I should feel like I should say that just to set the scene a bit. so so those those unplanned exits when we just close the business down or shut down.
Can there be a situation where the business owner goes, hey, look, they plan the wind down of their business or the fade away or whatever you want to call it, where they go. This is a lifestyle business. don’t want it to be anything different. I never intended for it to be worth something or maybe I hoped it would be worth something, but I realise that it’s not. I’ve extracted all my wealth outside of my business with realising that the business valuation was never gonna amount to much. And I’ve done my exit planning on my retirement slash pension panning outside of the business. Is that something you see very often?
It is. you hit on one of them. I’ll tell a story about somebody I know who’s in this exact situation. He is a mason, right? So he works with bricks and stones. And at one point in time, he had multiple trucks. He had a team of people. But over time, he’s kind of pared that down. It’s now just him. He has two sons. They’re not interested in the business. And so I’ve talked to him about it. And I said, you know, what’s your plan? And he said, when that time comes, I’ve got one truck. I don’t have any other assets. I’m just going to stop taking calls and that’s going to be it. And I said, fair point, right? I he doesn’t have any real assets. Maybe he could, he could turn his customer list over to somebody else. But to be honest with you, there’s not a lot of value in it. There’s, there’s nothing ongoing. So I think that’s a perfect example where you still need an exit strategy, which is, OK, how am I going to gracefully shut this thing down? But that may be the best option for you. Maybe you can sell his truck at the end of the day, but that’s it. So I think that’s a great example. And there are lifestyle businesses that that’s a perfect option for.
And that’s I think you raise a really good point. And it is I like the way he had a number of trucks and he’s gradually wound it down. So he’s he’s easing himself out of things and settling down, recognising that, a} he didn’t want to sell the business or didn’t want to go to the effort because some people just go, look, it’s just too much work to to get the business to that situation. I don’t want to be dealing with that stress. And that’s perfectly okay, right?
And this guy’s doing it on the front foot, which, you know, I guess you can’t get better than that, which is so much better than, my God, what just happened to my business? Where did it all go? My industry is now outdated. AI has taken over or DVD overtook from video or Netflix overtook from DVD. What just happened to my business, my industry? He’s on the front foot, lifestyle business, conscious choice, perfect scenario.
Exactly. my best advice was, think you have it kind of wrapped up, right? Like the day will come, you’ll say that’s enough. and to be honest with you, you know, the only risk is that if something happens, one of those five D’s, right? That you’ve talked about, you know, is there some kind of plan to deal with his existing clients? But other than that, he’s, and the big piece to it, Darryl is that unlike most business owners, he doesn’t have the vast majority of his financial assets tied up in his business. For many business owners, up to 80 % of their financial assets are tied up in their business. So if they can’t harvest that, they’re in a world of hurt when it comes to their next big thing. So he isn’t, right? He’s done his planning in other places. He doesn’t need cash out of that business, but a lot of business owners are not in that situation.
Yeah, I like that point you made there. He’s done financial planning, personal financial planning outside of the business, and he knows what’s happening. He knows how he’s going to fund his lifestyle once he’s no longer laying bricks or being a mason, which is which is the perfect scenario. OK, so so there’s a guy who knows what he’s doing. In your experience, Len, how many business owners are aware of the options that are available to them?
It’s not everybody. The data would say from the Exit Planning Institute that about 30 % of business owners don’t understand what their options are. And that’s actually a huge improvement over the past seven or eight years when it used to be about 60%. Yeah, so that’s good. I mean, it’s great that business owners are educating themselves about their options, but it’s still 30%.my goal from this conversation with you is that 30 % gets even smaller, right? More business owners know what their options are, so they can make a conscious choice and make a smart choice.
Well, yeah, I’m on the same page with you there. Our overall objective is that more business owners know what the options are available to them. And acting on those options so that we can increase the actual number of business owners that don’t get a shock or so that they do get to exit on their terms. even if it’s like your bricklayer friend, your Mason friend, you know, that they’re gracefully stepping out of their business or someone who’s handing over the reins or exiting some other way. We want them to do it on the front foot. So it’s a conscious decision. And whatever happens is pretty as close to as what they expect. And we don’t want any surprises. So the first thing is to start getting aware of what your options are. So let’s dig into that, shall we? are some of the options? Because we’ve talked about what we roughly call the fade away. What’s the next set of options from your perspective?
Yeah, I’m going to think about it. I want everybody to think about there. There are a set of internal options and then there are set of external options. So, you know, the kind of closed down is one of the external options, right? You’re going to maybe sell some assets, but that’s it. So let me talk about the internal options first. And what is probably a lot of people think about is a pure succession plan, right? Passing it along to a family member. And data would say that about so I’m going to talk about the older generation here. The older generation, about 50 % of them hope that their child or their heir is going to take over the business, right? So fully half. The reality is that only about 30 % of the businesses actually get passed along to a family member. And one of the biggest issues with that is just a lack of communication, right? The parents and the kids are not talking to each other. So the parents think, this is a great business. Why wouldn’t the kids want to take it over?
Yep.
The kids on the other hand are saying, I’ve seen my parents struggle and work too hard and, you know, sacrifice, sacrifice, sacrifice. I don’t want any piece of that. Right. So there’s this this gap of communication. But succession is clearly one of the big options. And again, it’s it’s a little under a third actually happen. And there are some pros to it. Right.
Yep.
Preserving the legacy, right? It’s a low cost option. The parent can have more control going forward than they may. And everybody’s motivated, right? This is a family thing. On the con side though, they may have to pick and choose, right? One child may feel slighted by this whole thing. And another big con is that typically the the kids in the transaction don’t have a big wad of cash. So now the parents are financing this thing, and so they’re not really out of it, and they don’t have the big lump of money. Tends to be the lowest sales price. Another piece to it is that key employees might bail, right? They may not want to work for the kids. And in addition, final thing is that just because the kids are the kids doesn’t mean they’re qualified to run the business. those are some of the pros and cons, but succession is clearly one thing that a lot of people think of as an option. And again, it preserves the legacy, right? The family stays involved.
Yeah, so I guess you’ve opened up a couple of options here. It can be family succession where the family takes over or it could be management succession where the next layer of management who know the business the best who have been involved in helping you drive the business and grow the business over a number of years, they may want to take over the business. that’s still a succession strategy, right?
Absolutely. some of the pros and cons to that are, again, you kind of keep it in the family, right? You have this continuity of the management structure. You probably keep your key people. And you can actually, one of the other pros is you can have a management buyout with some external money as well to help you with the liquidity piece, right? But there are cons as well. There can be a little bit of coercion, right? So it can be the threat of unless you give us this, we’re going to leave, right? Again, if you can’t find outside money, you might still be not with a lot of cash out the end of the transaction, know, lower price than a third party sale. And the biggest one really to keep in mind is that great managers may not be great entrepreneurs.
Right.
So people who have been helping to run the company with oversight of the owner, once they’re the owners, they may not, they just may not have that, you know, in them to drive the business and to be entrepreneurial.
That’s a really important point. I have met a number of people over the years and in an employment situation when they’ve got nothing at risk, they’re really good at making decisions. And when it’s someone else’s money at risk and they know and they don’t hold back in saying what should be done and sharing their opinion with you because they’ve been involved and invested in this business for many years and they know what’s required.
Yeah, but they’ve not had anything at risk. They’ve not had any skin in the game. So it’s really easy in that situation. And, and yeah, so you make a really good point about, on, what happens when it’s their house on the line that’s mortgaged or whatever you and yeah, it, when you’ve got skin in the game, everything becomes a whole lot more intense is, is, is the way I interpret it. Yeah. Every decision becomes a whole lot more important. And, you’ve got to make it. You’ve got to make sure that that’s the best possible decision.
Yeah.
And that can lead to a bit of paralysis for some people and others who have got a higher natural risk profile are excited by that and energised by that level of risk and desire to take things forward.
I completely agree with you. It’s just, you know, there’s a difference between a manager and an owner sometimes. And sometimes they’re the same, but when they’re not, you’re right. What ends up happening is, you know, no risk tolerance. So that means you’re, you know, you’re in stasis, right? You’re treading water. You’re not looking ahead. You’re not, you know, there are the operators and there are the visionaries. And if you don’t have enough for the visionary, it can hurt the business.
Yep. So we’ve got these internal succession strategies and it can be an MBO where the managers, if the business is big enough and prosperous enough and been growing and got a good track record, then it might attract some PE funding to help grow and invest in the management team or investors will back the management team because they’ve seen what they’ve done over the last few years. And the owners perhaps have been operating in a chair-type role for a number of years.
They’ve eliminated any sort of dependence upon the owner and they can demonstrate that the leadership team are the ones running and driving the business. And if that’s the case, they may attract some investment. If it’s a slightly smaller business, I guess some of the options on internal succession are that it could be vendor finance. So some sort of gradual buyout out of future profits. There’s a structure where you can do that here in the UK, where they create an employee ownership trust is one of the options there. There are other forms of employee ownership where the founders can gradually sell down year by year. So as you state, there’s pros and cons with all of these options. One of the cons are if you don’t do your planning upfront, you’re going to have a long earn out period, so to speak.
Exactly. And that’s one of the things to keep in mind is you need to figure out what your end game is. And you need to figure out how many financial assets you need to do what you want to do next. And so that can have a big impact on which of these options you choose. And you hinted at the final one I probably want to talk about, which is that employee stock ownership. So it’s all employees become owners.
And that’s another good one for kind of keeping people invested. There can be some in the US, there are some tax advantages to doing that because you can set up a trust. It gets more buy-in from the employees. But again, it’s complicated. It’s a high cost. again, you tend to not have a big liquidity event. And it can almost be a negative liquidity event where employees who leave need to be cashed out. And so the owners are now cash out of pocket. So they’re on the negative side in terms of liquidity. So that’s another option. And this is a good one where maybe the owner’s saying, hey, 10 years down the road, I want to be out, not a year or two. You need time to let this one work itself out.
Yeah. And that’s what I mean when I’m saying, hey, it’s a longer earn out period. If you’re gradually selling down over 10 years, it’s that transition period, which is a bit like an earn out period if you sell to a third party. So Len, are there any other internal options that you’re aware of or can think of that are available to business owners planning or starting to think about their exit?
The one other, and I’ll cover it quickly, is if you’ve got multiple partners, you could just sell to one of the existing partners. That’s not going to work if you’re a sole proprietor. But if you have multiple partners, there may be a way where you can sell to the existing partners. You need a buy-sell agreement in that. The tricky part there is how do you fund it? And one of the cons is the existing or the ongoing partners may not be, again, the best ones to run the business. They may have been pretty silent partners and not really qualified to take the business forward. So that kind of rounds out the internal options is, if you have partners in the business that want to take it over, again, you still got to finance it some way. But that would kind of close out my internal options.
Okay, so there’s your internal options. What comes next?
External options, right? So, and the biggest one, which has some flavors to it is the sales, sale to a third party, right? This is when, when small business owners were surveyed, this is the most popular option. About 60 % of them said, I want to sell to a third party. And there’s some good reasons for that. Typically it’s the highest price. It’s more cash upfront. It’s a much quicker path to walk out the door for the owner.
And it’s a relatively cost effective way to exit a business, right? It’s just a single transaction fee and it gets you out of the kind of family induced issues that can happen, right? It’s a clean break, right? And there are examples where in my past I’ve seen where there is a family succession intended. And at some point the owner says, you know what? I’d rather just sell this thing and give the kids the money rather than try and pass it along. So it’s just a cleaner break. But there are cons always to an external sale. It takes a long time. There’s due diligence. People are going to find out about it. There’s an emotional piece for the owners of I’m no longer going to be part of this business because I’m getting a check. It can cost a fair bit. And there are a coupletypes, you can talk to these as well, I’m sure. There are strategic buyers. This is somebody who sees your business as a way to help their business. That’s typically the person who’s going to be willing to pay the most. There’s a financial buyer who just wants a business to run. And so they’re going to pay less, but they’re going to be vested in and want to run it. And then there are P companies that will come in by some percentage, maybe a controlling interest.
They’ll probably want you to stick around for a little bit, but you’ll get cash upfront and then more cash potential when they turn around and sell the business again. So there are a couple of different types of financial buyers, but they all have the similar pros and cons that at some point it’s better because you’re to be able to walk away, but that has its own con that if you’re emotionally tied and not independent from the business, going to potentially cause some issues for you.
Yeah. So we’re always talking about one of the best scenarios is to ease yourself out and to eliminate owner dependence. So get out of the day job, get off the tools, get off production or operations or any sales type roles upfront or any client related roles, customer related roles as a first step. And then, you know, maybe you’re just involved in purely the running of the business, the management and then if you can extract yourself from any leadership roles as well and into a chairman type role, and then you’re running the business via remote control and you’ve got the leadership team running the business, there’s a best possible scenario. So you’ve perhaps successioned yourself out of the business, but you still own equity. then, so the business is running itself continues to grow and you just take a dividend and maybe on a board role or a chair type role and then when the timing comes, if you sell the equity, if you’re in that type of journey, it’s going to be the smoothest, I guess, emotional journey for you. You’ve still got the nuts and bolts of going through due diligence and and feel like you’ve got your soul being put through the wringer as as you know, these people are questioning your integrity every step of the way. And that’s what it feels like. But all they want to know is that they’re really confident about the investment they’re buying and what it is they’re actually buying and and are there any surprises that are going to come up and bite them in the backside out of the blue?
I agree. this is the devil’s in the details with these kinds of deals of how much of the purchase price is upfront versus on an earn out. How confident are you that that earn out is going to happen? So there are lots of challenges in sales to third parties. But again, typically the highest sales price. So that’s the carrot is that you’re normally going to if it works, you’re going to benefit the most.
Yeah. There’s the carrot.
But again, there are pros and cons to all these scenarios, as I hope I’ve been clear about. And the best news is that, yeah, just be able to think about each one and know that they each exist so you can run your own to know what works for you, what doesn’t work for you. But that owner-independency you just talked about is absolutely crucial, regardless of the scenario, regardless of the exit option, getting that independence from the business is the most important thing.
Yeah. So then given that you’re an exit planner, you help business owners prepare their businesses to be ready for exit. What are some of the things that you consider to help them pick the best option for them?
I think there are a couple. One is time frame. There are certainly some of these options that take longer than others. The other would be this how involved do you want to be is a big piece, right? So some does.
What do you mean by that? How involved?
So some business owners, when they get to this point, when they come to me, they say, Len, I got to get out. I’m burnt out. That’s not what I want to hear as an exit planner because many of these options take time. Getting the business ready takes time. So how long is your window for when you want to be out? And then I think one of the other key parts is what do you need? What is your number? What amount of capital or cash, financial assets do you need out of the business? And again, on what timeframe? So those to me are huge drivers in how to think about this and what the best options for you are. Because it can go from, if you talk about that succession plan, typically the kids don’t have millions of dollars lined up.
Whereas private equity does, they can write you a check tomorrow. So those are the kind of things to weigh. And then I could talk about how much involvement do you want going forward? If it’s your kids, you can continue to have impact on them. If you’re now the minority shareholder of a PEO firm, they can tell you take a hike tomorrow kind of thing. So those are some of the factors. Timeline access to cash and how much you want to be involved.
Okay, so we’ve got some access to cash and you need to have a number in mind. Now, how often in your experience is that number an aspirational number? I think the business owes me this much or I want to sell it for this much compared to, look, here’s a goal. We know the business is worth X amount today, but just as our own personal challenge, we want it to be some sort of function of X before we leave just because we’re entrepreneurs and we like challenges and we want to push through and there’s a whole lot more of excitement and fun that we’ll have getting it from where it is now to that potential valuation.
It’s a difficult conversation I have with clients early on. One of the first things we do is a business valuation, and say, what is it worth today? And it’s a great conversation when the results come back and the business owner says, that’s about what I was expecting. Most of the time, there is a gap, in quite a healthy gap.
There’s a big guy.
And I have to have that conversation of just because you’ve worked really hard for 20 years and put your blood, sweat, and tears in this business doesn’t matter to anyone else, right? That’s a difficult conversation.
Yeah. So what it’s worth to you as the owner and what it’s worth to someone else are two different things. And, you know, one of the things that we can say is as soon as it’s worth more to someone else than it is worth to you, then you’re in a good position.
Exactly. Exactly. And that’s, that’s a big piece of what I help my clients do is to get them to structure their company so that it is attractive to an outside buyer. And to be honest with you, it doesn’t matter their option at that point, even if it’s a succession plan, you want it to be tuned to be running as efficiently as it can. But but a lot of that is what do external buyers care about? And that’s what that’s what the business owner needs to focus on.
Okay, so we’re talking specifically today around what are some of the options because we’ve addressed some of the risks in a number of other episodes. But we’re talking about now, so we’re going, okay, we’re getting some external buyers in place and going, hey, some of them could be effectively a competitor wanting to mop up some market share or some access to slightly different product that they don’t have, whether it be service or it be they’re looking to X, you know, your people, your skills, whatever it is but just a competitor looking to buy up or all the way through to a strategic buyer that you already touched on where they’re saying, actually, this business is a standalone plugin that either gives me access to a new marketplace that I don’t have or gives me access to a product that’s complementary to my current distribution sources. And if I put their product through my network and my product through their network, it’s a win-win. I’ll pay a lot more for that it’s going to be cheaper for me to buy this business than it is to build my own capability and build what they’ve already got. If they’re two extremes of, let’s call it the external options, what are some of the, I guess, pros, cons, things we need to consider before, I guess, assessing which one of those are really available to us? Is that the first question, Len? What’s available to us?
Yeah, and that’s part of what you need to kind of look internally and say, what is the state of the market? Am I a leader in this market? Am I a follower in this market? Am I the big player in this market or the small player? So taking those factors into consideration is typically the first step. So you kind of understand your place. And remember, as small business owners typically aren’t experts in selling their companies, right? They typically run it and they do this once or maybe twice in their lifetime. So there is a piece, a part where you need help, right? And there’s a, what I do as a business coach is one component, but I’m part of a team typically of lawyers, accountants, financial planners, maybe life coaches.
And then when you get to that point based on your size, either a business broker or an &A advisor, right? And what they’re going to be able to do is tell you, given the market and your place in it, what are the options that you should consider, right? Is this really, you you don’t do anything exceptional. You’re going to kind of expect average earnings multiples, or, you know, I can see where you could help this set of companies and they would place extreme value on what you do. And that might be a competitor or not a competitor like you talked about. there is a point where you need to, as the business owner, get some external help to say who would be interested in my company. Because most of time you’re not going to know that yourself.
Okay, so we’ve got some assessment of whether a competitor buys us or a PE. I guess it’s also worth noting at this point with if a strategic buyer is going to buy you, are potentially coming from outside of your industry. They are likely to be a whole lot bigger than you. Possibly potentially have acquired a number of other businesses in the past.
How big does a business have to be before someone like that is going to be interested in doing an acquisition? Because I guess you’ve already mentioned that you’re part of a team. And if they’re going to invest and bring this team in to assess your business, I guess it needs to be of a certain size to make it worthwhile. Have you got some views on how big you need to be before you become attractive to a strategic or PE type investment?
Yeah, just some rough guidelines. It really is dependent. It could be a technology that you have that is phenomenal, though it’s nascent. It’s tiny. But effectively, the kind of $1 to $10 million businesses in revenue, US dollars, are normally handled by business brokers. Those are folks who are going to try and set up an auction type of situation for your company.
Once you get to above 10, 20 million, that’s where, you know, typically an &A advisor is going to come into play and they’re going to have access more to the larger companies that are interested. So I know that’s not a perfect example, but that kind of one to 10 is usually business brokers who are just trying to work within their networks. And that’s going to be more financial buyers, right? Somebody who’s just looking to acquire. The larger ones are going to be brought about by those &A advisors to have a vast network of potential buyers.
So the difference being a broker is typically smaller. think you mentioned that they’re working with smaller businesses. They’re possibly more likely going to be picking up buyers who are more local geographically and more likely to be, I guess, a competitor who’s perhaps just a bit bigger than you looking to extend what they already do. Is that a fair summary there?
That’s a fair assessment, yes.
And then the &A advisors are the guys out there who have perhaps got national networks. They’ve got some bigger, more strategic relationships. They know some of the bigger players because we’re now dealing with something a little more established. You know, possibly got EBITDAs of sort of, guess, two, two mil plus. And, you know, so now they’ve got some businesses that have got, you know, once they’re that size, they’ve definitely got a leadership team in place.
perhaps a mid-layer management as well. It’s fairly established board and governance practices and guidelines. It’s a get to this stage where it’s a well-established business with a lot of good practices in place. And the owners, hopefully if they’re involved in their business at this stage is because they want to be involved rather than they have to be involved because they’re operating in key roles.
Exactly. So it’s a maturity thing and you hope to have that maturity at all phases and all sizes it is, but it is more common at those stages. And again, when you get to that bigger size, that then for a larger acquirer, you know, just has a greater impact, right? It’s tougher for them to make a difference if they’re acquiring companies that are, you know, 2 million, 3 million in revenue.
Yeah. Okay. So, so Len, where are we getting to? Are we getting to the point where we’re saying that your options, your size of business, how established and mature your business really is what’s driving the options that are available to you. And what we’re talking about here is the options that are really where we’re looking to maximise the valuation and ensure that the business, well, we don’t even need to be insured business lives on, but we’re looking to, to go what’s, what’s best for, for the business moving on. And it really is the size of the business that determines the options that are available.
I think that’s a pretty good indicator, right? Unless there is some unique technology that could be taken advantage of by a large company that has huge potential for the most parts, for most of the businesses that I’m dealing with, yeah, the bigger you are, the more options you have.
Brilliant. OK, given that it’s size, you know, there’s still going to be a whole lot of factors that influence how you’re within whatever size you are. There’s going to be a whole lot of factors that determine how attractive your business is to be sold. How long does it take to be addressing those things to, guess, close that gap you were referring to earlier and and maximise your valuation within, guess, let’s call it your size bracket or your size category?
Really dependent on where you are to start with, but I’m typically working with businesses in normally that kind two to five year range of preparation time. there are many factors that either increase or decrease the value of your business. I look at about 40 of them and each one is kind of red, yellow, green. Is it great? Is it okay? Or does it need to be fixed?
Okay.
Some of those things can be fixed almost overnight. Some of them can’t. If you think about financial reporting, can’t just make things go away. That happened six months ago, right? So there are things that take time. are tax issues that you need a heads up. You know, need years of history to make work to be tax advantage. So there are some things that just take longer. Other things that Darryl Bates-Brownsword can be fixed more quickly. So it is a combination of factors, but I like to talk to business owners at least, like I said, two to five years in advance of when they want to transition out.
And so it’s two to five years. What sort of impact can you have on the valuation of the business over two to five years compared to if it’s two to five years of working with you, it sounds like it’s going to be a fair old cost involved as well.
Yeah, there are really two factors that I try to impact. The first is, most businesses in the SME, SMB space are valued on their EBITDA, right, there are earnings before interest, taxes, depreciation, right. So the first thing I work on is increasing the EBITDA. So that’s one factor. And then the other factor is the multiple, right. So, and the way to impact the multiple are predominantly by increasing the value of the intangible assets. How strong is the team? How good is the accounting? How well does the business owner understand what drives the business? How focused are they? So there are all these intangible factors. So really, it’s the combination of those two. It’s increasing earnings and then increasing the multiple that have the biggest impact of me working with a client. So it’s not one or the other. It’s the combination of those two that really can change the you know, change the end number.
Okay, so are we talking about like a 30 % increase in valuation from starting point to close that gap that you referenced? Is it bigger? I get that it’s going to be different with every single client and industry based, but are there some sort of generalisations that we can throw out there to help business owners know the impact that doing some serious exit planning can make on their their exit journey?
Yeah, think it’s higher than that. I think it’s multiples, right? I mean, what I’m shooting for is two, three X valuations of current, right? So to have much bigger impact than just a 30%. The idea is that this is, yeah, that’s the idea is that this is game changing. And again, business owners are great. They take the risks. They do the work every day.
300 percent.
But I think they tend to be a little insular and internally focused and not spend as much time thinking about, how would this be viewed externally? And so that’s the lens I try to get them to think about. And this isn’t doing something radical, like completely changing their business because they’ve been successful for a good reason. But it’s all those things like I talked about, getting the independence, understanding your metrics, strengthening your team, getting independence all those things end up yielding those much bigger multiples.
OK, so where are we? We’ve talked about the exit options being available to us broadly fall into two categories, being internal or an external exit. We’ve talked about the internal and the external. There are options within each of those categories. We’ve gone from selling to a competitor or just fading away and ceasing to exist all the way through to selling to a strategic acquirer.
And we’ve covered a whole lot of ground that should provide some food for thought for business owners just thinking about what their options are, Len. But from your perspective, what’s the key message? What’s the takeaway you hope the listeners hear from our conversation today?
What I want everybody to realise is that they do have options. And regardless of what option they choose, the core pieces that they need to be working on are the same, right? They need to be getting their business ready to transition. And by doing so, by getting independence and focusing on the right parts of their business, they are going to have more options. I think that’s the best news, right?
They will have more options if they’ve set their business up. And then it really is this matter of figuring out what’s most important to them. And by stack ranking what’s important to them, it’s going to be a pretty easy slide into which option is the best for me. So just knowing what they are, think, knowing what the options are is great. But being ready then opens up more of the options.
If you want more options.
Brilliant. More options gives more choices, better choices and a better takeaway. Len Bruskiewicz,
Awesome, appreciate it.
About Len Bruskiewitz
Len Bruskiewitz is a Focal Point Business Coach and Certified Exit Planning Advisor, passionate about helping business owners generating $1-15M in revenue successfully transition out of their companies—on their timeline and terms—so they can move on to their next great adventure. Many small businesses lack a transition plan, which can lead to disastrous outcomes for everyone involved, including the business owner, their family, customers, vendors, and the community. His goal is to reduce their stress and increase the value of their companies for as many owners as possible.
Before becoming a coach, Len helped leading companies that serve small business customers—including Intuit, Constant Contact, Grasshopper, and Nextiva—grow their revenue through successful partner programs. At Intuit, he was the business leader who launched QuickBase, one of the earliest SaaS solutions in the market. Throughout his career, he has owned businesses, worked at startups, and been part of startups that grew into large enterprises.
As a third-generation business owner, Len comes from a family of entrepreneurs—both sets of his grandparents started businesses after moving to the U.S. in the 1800s. He lives outside of Boston, MA, and when he’s not working, he enjoys playing ice hockey and pickleball—but not at the same time.
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