Podcasts
Exit Like a Boss: Preparing Your Business for a Successful Sale with Kevin Harrington
In the Exit Insights podcast episode, Darryl Bates-Brownsword is joined by his business partner Kevin Harrington to reveal critical insights on preparing your business for a successful exit. After hosting over 150 episodes, Darryl takes a new direction with the podcast to share the wealth of experience Succession Plus has accumulated.
A key highlight of the discussion is the Sellability Score – a quick yet powerful tool that business owners can use to get an immediate sense of their business’s strengths and areas for improvement. This tool assesses three pillars: owner readiness, business readiness, and financial alignment. Why is this important? Because without these three elements in place, your chances of achieving a successful sale may be slim.
One of the most significant risks to successful exits, Darryl explains, is “owner dependence.” Business owners often overlook the need to gradually reduce their role in daily operations, making the business more attractive to potential buyers. In short, the more you prepare, the smoother the process – and the higher the likelihood of securing favourable terms.
Watch the episode here:.
Welcome to the podcast that’s dedicated to helping business owners prepare for exit so you can maximise the valuation and then exit on your terms. I’m Darryl Bates-Brownsword and Succession Plus is bringing you the podcast today. And with that, I’ve brought my business partner back in, Kevin Harrington. It’s a bit different today. It’s the same podcast, but a little bit different. We’re changing direction a bit.
We’ve been interviewing guests, about 150 now. And I thought, what better way to celebrate that than to bring Kevin back? We did a few together in the early days and then we started interviewing guests. But I missed, if I’m honest, the banter that we had between us and just discussing all things and the tools that we have to help you get ready for exit. So Kevin, good to have you back on the podcast, mate.
Hi, Darryl. Yes, I mean, our previous podcasts together have ended up being a little bit of a rant here and there, because we do have quite a lot of combined experience with this now, don’t we? mean, as a business, we started exit planning and succession planning for businesses 2009. And in the UK, you know, we’ve been at it for nearly five years now.
So there is quite a lot of real data and experience we’ve got around this, which is a good thing to try and share today.
Absolutely. And yeah, the business as a whole focused on exit planning, you say, 2009. But during that time, even though we didn’t focus on exit planning here in the UK until 2019, the people in the team have a truckload of experience of helping business owners build and prepare and increase the valuation of their business, even if they weren’t specifically gearing them up to be ready for exit. that’s
And I guess that’s been the source of a number of our rants, hasn’t it? Our, if you like, our frustration on behalf of business owners that they’ve invested all this time and money and effort over sometimes many years, sometimes a lifetime, thinking that their business is going to be a pension, thinking that their business is going to give them a big payday when they’re ready.
but to have a bit of a surprise when the time comes that it’s not just as easy as they were hoping or anticipating it would be.
Well, yes, I’m not absolutely sure all our contacts and businesses that we’ve been working with set out to think about exiting their business. I think they set out to do great jobs for their customers. They set out many of them to deliver their craft skill, their profession, their B2B service, whatever it might be, to make a profit, to make a living, to employ people and to grow and to earn more money and all that stuff. And then…
At some point, there’s this thought, well, could I exit my business? And, and that and that’s where the journey of misinformation often starts for individuals. Because there are so many myths out there around exiting a business. And many of them start down the pub on a Friday night where your son mate says, well, yeah, you’re in that industry, are you? Well, a multiplier for that’s your your EBITDA profit.
Yeah.
Multiplied by seven or whatever and is that right? And what qualifies people to say that? Not all businesses are the same. And what I love about so many of our clients is they’re experts at their business. They do such wonderful jobs and they clearly know so much rich, deep knowledge about their sector, their trade, whatever it is. And the trouble is,
that when it comes down to business exits, for most people, it’s the first time and probably the only time they’ll do it for the majority. And all of a sudden this kind of, well, I know it all position gets transferred into, well, I know how to sell my business, but actually it’s a fairly specialist thing. On Friday, I went to a business networking thing and the first person I bumped into, which nearly made me want to leave to be honest,
She said, after some considerable while of telling me how wonderful her businesses were, she had three businesses, she said, what do you do? And I said, well, we help businesses successfully exit and succession planning, things like that. She said, finance, that’s what you do then, it? And that was the immediate start point that getting a business ready to sell is only about the money. Of course, the money is important.
You know, what about the component parts? The numbers are very important, but is the owner ready for exit? Do they know what they want to do? Are they capable of exiting the business and it carrying on? And to that end, is the business exit ready? If someone new came in to run it, is it sustainable? Those aren’t finance questions. And so the absolute start point is…
Let’s get a baseline for what condition your business is in. That’s what people should do first of all, rather than assume it’s about the money.
100 percent like the money. The money is what the finance people see and they and that’s what you is. I guess it’s a tangible aspect. But as you say, there are three legs to the stool, if you like. We need to make sure or if you’re a business owner and you’re thinking about exit, you want to make sure that you’re exit ready. Are you going to be ready for exit? The second one is, will the business be exit ready when you’re ready to exit? You know, those two things need to line up and to.
to maximise evaluation, they need to be on par. And the third one is that the numbers have got to work. There’s no point in that the business being exit ready and you being ready to exit and the valuation of the business and the attractiveness or the deal and the terms of the business aren’t going to work for you. The valuation that the buyer sees in the business might not be the number that you want or need or your aspirational value.
for you to get the exit and the lifestyle that you’re looking for for whatever’s next on your journey. So we’ve got to make sure that the business is exit ready when the owners are ready to exit and the numbers are gonna work. And they’re the three areas that if you like in messaging came back and again and again as consistent feedback, no matter who I’ve spoken to on the podcast in the past, whether it be an owner who successfully exited their business and they said.
This is what I wish I knew before I started the exit process about getting all these things lined up. I’ve spoken to maybe a hundred different advisors and some of those advisors are business owners who’ve exited their business. So there’s a double benefit there. Regardless of the type of advice they’re giving, they keep coming back and giving me the same feedback. And I guess that’s why…
It feels like the right time now, Kevin, to change the format of the podcast somewhat for us to be talking about the tools and benefits of the 21 step process that we have. And no one cares about this 21 step process. They care about what that process can deliver for them. And, you know, I’ve spoken to all these people over the last, well, probably four years we’ve been doing the podcast and are there about, so I should get my facts right there. But 2020, we started, so that’s near enough to four whole years. And the feedback was just consistent, consistent, consistent around getting the business exit ready, making sure the owners are ready and they know what they’re going to do next and that they know how the numbers are going to work. So let’s start talking about how we can address those things because Succession Plus already have all of the tools in place. We’ve got a number of tools, templates, checklists, process, you name it. We’ve got the armory to help address all of those things for business owners. But when I’m interviewing other people on the podcast, I just never got the opportunity to share them too much. And that’s what this change is all about. So where should we start? At the beginning of our tool and talk about the business sellability score?
Hmm. Yes, yes, I think that’s exactly where we start. But while you were just speaking there, Darryl, in my mind, I was suddenly reminded of a friend of mine who was a bit of a couch potato that ended up recently doing a 10K run. And I mean, quite an achievement, but of course that person, a chap as it happens, a bloke, when he went out and ran that 10K and did a half decent time, so he tells me,
Wow.
He didn’t just get off his sofa and do it. He utilised a number of support tools, getting the right footwear, researching what he needed to do in terms of having the right energy and water intake and carbs and all that stuff. And then did training for it, got himself ready for it so that when he did the final thing, it was no surprise he completed it well. And I think this is a…
No.
an overarching thing we must keep reminding people about is that business exits are planable things. You can determine to do it and you can go through a number of steps and activities and get there and be successful and proud of yourself at the end, as my friend was with his 10k run. And you’re referring now and this is what we should talk about is the tools we’ve got to help people step through that. And each individual stage is
Yep.
pretty straightforward really. What it does require is someone to be determined to go down that route to maximise the value of their business and their enterprise and enjoy the process. And you referred to the sellability score and that’s absolutely the easiest and quickest start point for anyone to start getting focused around how to exit their business.
Yeah. And the reason we built the score is so that there are no nasty surprises. If you’ve been building your business and you have an assumption or an expectation that you want to sell it and that you’re going to sell it and either move into the next phase or use that as funding for it to start something new, you want to make sure that when you do exit, you want it to be on as much as your terms as possible. And the more you prepare your business, the more that the terms you can create and negotiate favorable terms for yourself, or at least the terms that work for you. So, yeah, the first thing you need to know is that your aspirational number, that the business valuation to someone else is higher than your aspirational number. Yeah, there’s pros and cons about different types of valuation. But what we want to do is just go, well, let’s do some best practice type of analysis and see how a buyer might value your business as a starting point and have a look at all the things that they will consider when they’re looking at your business that they will see as negative and go, that makes it harder to deal. That increases the risk to the buyer, which they might back away from. And we talked to a lot of businesses where they’ve had someone come and have a nibble at their business and then for whatever reason moved on. And the reasoning is often given is, well, it’s just the timing’s not right.
And I guess our experience is that the reason they say the timing’s not right or this is just not the right business for us is that’s just the polite, most polite and easy way to give the answer of going, it’s just too risky for us. We look at this business, it’d be too much work to buy it or your valuation expectations are just way out of kilter with what our valuation expectations are because of the risks in your business.
Yeah, that’s a good point, isn’t it? The, the I will think about it response, which we’ve all had in our careers and businesses over the years, is really someone saying, yeah, no, thanks at the moment. And it’s, it’s the, the polite objection, isn’t it? And, and we go, well, do know what our business is sellable? It’s just not quite right for them at this moment. And, and actually what’s underlying that and your words there was, Darryl was risk.
What risks did that person not want to take? That’s what we need to understand.
Absolutely. that’s what we’re doing with this business sellability score. We’re assessing the risk and we’re looking for the pros and the cons. the sellability score is 28 questions. And we break the answers down into those three areas that we’re talking about earlier. We want to know and we’re making an assessment on how ready the owner is to leave and move on to something else.
We want to know how ready the business is to operate with new owners and to continue its trajectory with new ownership, or how much of the business require the current ownership to be involved or the founders to be involved to continue that trend. And then we make an assessment of the governance and the risk and therefore the numbers. Does the valuation meet the current owners’ requirements?
without having to do anything, I guess, risky, to use that word again, is the valuation or for the owners to get the valuation they want, are they going to have to work an earn out or is it fairly achievable without having to work an earn out or unfavorable terms?
Yes, and that’s a good summary of it. When I last ran through the Celebrity Score to get the feeling for how it’s working and how it’s evolved, it took about four or five minutes to do. And it gave me some immediate responses. I mean, I actually did it thinking about our business. And you look at it and go, yeah, okay, we are saleable, but there’s a couple of things we could always do better.
the best of businesses can do things better. But it points us in the right direction. And it is those three pillars that you talked about is, are the owners ready to exit? Is the business exit ready? And do the numbers work? And it gives a separate score for each of those, which is amalgamated. And out of that, it’s food for thought. And if anyone wants to do that, they can do it free of charge.
Now on Succession Plus and on our homepage there there’s a celebrity score link. Yeah, of course we ask for an email address, why wouldn’t we? But we’re not going to chase you around and phone you up every five minutes. What we want you to do, want our visitors and people entering their data to get an idea themselves about what their business is looking like. And from that we
deliver some ideas in the report about what you should consider, what are the important things, what next steps could be and so forth. That’s the initial let’s get going. Let’s start dealing with some facts about our business rather than the Friday night valuation down the pub.
Well, let’s talk about that because we do ask for an email address and that’s just so that we can share some extra material with you. If you take the score, you’ll get like five emails from us. We won’t pester you. But each of those emails will have some follow up educational material because we want to help you make sure that your business is sellable. Currently in the marketplace, there’s a well-cited stat.
And the stat comes from the, I think it’s the Association of Business Brokers. And what they’ve done some research and they’ve determined for owner managed businesses, 80 % of all the businesses that go to market, 80 % fail to reach a deal. And for us, that’s just, it’s avoidable. It’s unacceptable because it is avoidable if you do the work and you prepare your business in advance and you actually make it attractive to be acquired.
And that’s what most business owners are not doing. They’re thinking that their business is like a house. When they’re ready, they can just whack it on the market and someone will come and buy their house. But there are so many more moving parts in a business which increases the risk to the buyer. So, you know, that’s why it needs a lot more preparation. And the sooner you do that preparation, the sooner you’ve got a business that just so happens to run better. So we want to make sure that you know there’s no surprises for you.
You can start to find out is your business sellable or is there some work that you have to do to make it sellable? Or even if you just do the test and the scorecard and you get some relativity and go, how sellable is it at the moment compared to what I thought? And hopefully there’s some questions in there that will just make you stop and think and help you start to think in those three areas of yourself, the business, and the valuation.
So what are the follow-ups? The first thing we do is we go, look, the biggest issue in an owner managed business is that the business depends too much on the owners. It’s owner dependent. So the first thing we’ll do is we’ll send you a white paper, a document, a bit of a checklist if you like to go, what are all the things that make the business dependent on you as an owner? So there’s some value in that yourself. You do the scorecard you’ll get that white paper that’s come from all of our years of experience and analysing hundreds of businesses. The next one is we’ll also share with you a exit planning checklist. If you want to start thinking about how to prepare your business fora exit, if it’s in 12 months, two years, five years, whatever the number is, the sooner you get it ready, the better. So we’ll give you an exit planning checklist. So it’ll identify what are the 21 areas that you need to work on to get your business exit ready.
We’ve also got a podcast, a limited series podcast, if you like. It’s just got 21 episodes. Each of those is less than 10 minutes each. The podcast is from our founder, Craig West. So, Ozzy, who started Succession Plus in 2009 and worked with hundreds of business owners who got the makes it ready. So he’s prepared the Exit Like a Boss podcast. So we’ll share that with you. And the last thing that we’re going to share with you is…
our will give you an invitation if you if you’re getting value and we hope you do get value because the feedback is that all these tools have been pretty helpful so far. But what we’ll do is if you’ve if you’ve enjoyed the material that we’ve shared with you, we will invite you to participate in a value gap analysis. So what that is, is that that’s a bit of a high level, if you like, overview of your business. So it’s a bit more detailed.
Big chunk of you know, there’s another 30 odd questions on this. This assessment, it’s a value gap indicator, and it’s the next level, if you like, from the business sellability scorecard. And what that will do is it’ll do some analysis about your industry, the size of your business. So it moves far beyond just is my business sellable? It’ll go, okay, what’s the valuation or an indicative valuation of your business today? And what could the valuation be if you addressed all of the gaps that holding the valuation back? All of the risk, it’ll go, here’s the risk that you need to address in your business. And this is the benefit. This is an actual numerical benefit, potential valuation for your business. And that’s quite a useful tool if you are serious about thinking about, can I exit my business? And what do I need to do to increase the valuation and to really get that exit on my terms to really reduce the risk of having to work any sort of earn out to get the number I want.
Yeah, it’s a bit, it has some similarities with one of these Bupa Health Scheme things, doesn’t it? In that if you really want to be healthy and achieve everything you want to achieve, with Bupa, they’d go along and test you on everything and measure things and ask you questions.
That’s exactly what this is. Find out where you are today. And we do have businesses, Darrell, know, quite a few of them off the top of your head as I do, that have done these assessments and have come out really well. And, you know, they’re healthy businesses. They’re doing a great job in the marketplace, and they are largely pretty saleable. But there’s still a bit of a gap there because people haven’t been focusing on selling the business, have been focusing on doing great things for their marketplace and their clients.
And what this does is it helps people at the top of their game focus on the things that make the cherry on the cake, the icing or whatever. But we find consistently for many businesses, there are significant changes that need to be made in thinking and direction and vision, I guess, that this alerts people to. They can choose from this to do it by themselves, which is perfectly acceptable.
but reasonably difficult while you’re running a business. And if you’ve not exited a business before, generally you need a bit of help and guidance on it. So alternatively, people can then talk to us about working with us over a two, three year period where we will help them through those 21 steps combined into those five stages and get those businesses exit ready.
One the interesting byproducts of all of this that we’ve noticed is that when people set out to genuinely make their businesses exit ready, they start to enjoy their businesses more, they start to run smoother, they’re prouder businesses, they’re standing taller, everyone in the organisation has a better understanding of what they’re doing and why, efficiency and effectiveness changes. And that’s to the end positive.
benefit of the customer, the client, which is part of the circle of making a great farm business. And that’s how you start to increase value and increase the likelihood of a buyer going, do you know what? Your business is just the one I want to buy. It’s running well and the risks are low. Tell me more about your business.
Yeah, absolutely. makes you make a really good point. you get your business ready to be exited or exitable, whatever you like, you don’t have to press the button. You can have it exit ready for as long as you want. And the beauty of that is a lot of business owners in that, I guess, one to 10 million revenue bracket. So the smaller end are really hoping that one day they’ll get their business to a point where it gets noticed.
and someone comes and sort of taps them on the shoulder and says, look, I’m interested in buying your business. Now, if you’ve done the work and you’ve addressed all the risks and you’ve got your business running really well and is exitable, then that deal isn’t going to fall over. They’re not going to go, hey, look, you know, it’s not the right time for us or it’s just not quite the right business for us or what have you. You’ve got more chance that a deal will go ahead and you will get a far more attractive offer. So.
Why do you want the business exitable or do the exit planning upfront and take even two or three years, as Kevin has suggested? You get a whole, you get a business that’s stress free. You get a business that’s more profitable and more efficient and more effective, and you get more spare time and you get to be working on the areas of the business that you really love and can focus on increasing the valuation of the business rather than being in the thick of it in the.
the daily grind side of the business. So you make a better business for the employees, your team, but also for yourself. So it’s a win-win, isn’t it?
Absolutely, and it really starts here, doesn’t it? If people are excited and interested about exiting their business and want to know how sellable it is, just go to succession.plus and fill in the, how many questions? 24, 25 question, sellability score, and just start from there. What we do love is having conversations with people as well. we do recognise that people…
learn, engage and progress in different ways. We’re all different. Some people want to study all the paperwork and we’ve got tons of that that we can share. We’ve got a 310 page book, which is a case study of a client, all anonymised, of course. And then right through to the other end, there’s some people are much more relationship driven that would rather sit and have a face to face conversation. If people want to do that over a cup of coffee, that’s great. But start with a sellability score.
Get a baseline for whether your business is saleable. Are the owners ready? Is the business ready? Are the numbers right? Get a feel for the balance of that and you’re off and running on a journey to successfully exit.
So what we’ll do, Kevin, is I think that’s probably a good wrap up point for today. We’ve pulled it all together. I think some of the thoughts that we wanted to share, but what we’ll do is include in the show note to this podcast. So whether you’re on Apple or Spotify or you’re looking at on YouTube, we’ll put the links directly to the sellability score so that you can get onto that easily and start your, I guess, your journey of going just double checking for yourself and making sure that when the time comes for you,
There’s not going to be any nasty surprises. We want to make sure that when you do exit your business, that it feels like the pinnacle of your career. You don’t want it to feel like a messy divorce.
Darryl Bates-Brownsword (26:49.735)
Kevin, thanks for sharing your exit insights with us today. And if you’ve enjoyed this new style or this is back to the old style podcast with Kevin and myself, click the link and subscribe to the podcast. We’d love to have your company for all future episodes. Thanks for joining me, Kevin.
Yep, thank you very much.
About Kevin Harrington
Kevin Harrington- Succession Plus UK Partner
Having worked in technology, telecoms, consumer electronics, payments, media and publishing, Kevin has enjoyed an interesting career history that embraces product and services businesses at all stages of their journey.
Before joining Succession Plus he was CMO with The Panoply plc, a digitally native technology services company, founded in 2016, with the aim of identifying and acquiring best-of-breed specialist information technology and innovation consulting businesses. He joined The Panoply from Tungsten Network where he was Chief Commercial Officer.
Previous roles have included working with SMEs and large international businesses. Some highlights are Managing Director at the Emerging Payments Awards and the Prepaid Awards; Managing Director of Gx; Director of Sodexo Motivation Solutions; Global Marketing Director at BBC Worldwide; Product Group Marketing Manager with Sony UK.
His career started out in a completely different direction. His first two full-time roles were as a junior in an architect’s office and a civil engineering technician. Some of his drawings and designs were constructed and are still standing.
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