Many entrepreneurs are wired for optimism—it’s what gives them the confidence to start a business, push through challenges, and achieve success. But when it comes to selling their business, that same optimism can be their biggest blind spot.
In this episode of the Exit Insights Podcast, Darryl Bates-Brownsword and Kevin Harrington discuss how an entrepreneur’s mindset can work against them when preparing for an exit.
Why Optimism Can Be a Risk in Exit Planning
Entrepreneurs are problem solvers, always looking ahead to the next opportunity. They’ve built a business from the ground up, so why should selling it be any different?
Here’s the challenge: most business owners only sell a business once in their lifetime. Unlike starting a business—where they can pivot, adjust, and try again—an exit is usually a one-shot deal. And yet, many leave it to the last minute, assuming they’ll “figure it out” when the time comes.
3 Common Exit Planning Mistakes
1. Overestimating Business Value
Many owners have a number in mind for what they think their business is worth – often based on what a friend sold their business for or a generic industry multiplier. But valuation isn’t just about revenue. Buyers look at risks, dependencies, leadership teams, and future growth potential. Without early preparation, owners can be caught off guard when offers come in lower than expected.
2. Thinking the Business Will Sell Itself
A strong business isn’t necessarily an attractive business to buyers. Just like a house needs staging before a sale, a business needs to be positioned properly—complete with the right financials, a strong management team, and systems that don’t rely on the owner.
3. Waiting Too Long to Plan
Selling a business isn’t like selling a car or a house—there’s no “Auto Trader” for companies. It takes time to find the right buyer, prepare due diligence, and negotiate terms that work for you. Business owners who wait too long often end up rushing the process, lowering their valuation, or agreeing to risky earn-out deals.
How to Exit on Your Terms
- Think Like a Buyer – What makes your business valuable to an acquirer?
- Build an Attractive Proposition – Position your business as a strong investment, not just a profitable company.
- Start Planning Early – The earlier you remove risks and increase value, the stronger your negotiation position.
“Most entrepreneurs don’t feel the pain of an unplanned exit—until it’s too late.”
Watch the episode here:.
Welcome to the podcast that’s dedicated to helping business owners to prepare for exit so you can then be in a position to maximise your valuation and then go on to exit on your terms. This is the Exit Insights podcast presented by Succession Plus. I’m Darryl Bates-Brownsword and as usual I’m joined by my colleague Kevin Harrington. How are you today Kevin?
I’m very well, I keep saying that even though I’ve got a good old dose of seasonal lergy. Shame I can’t be with you so I can share it.
Yeah, you’re, yeah, wonderful. Kevin, hey, we’ve got a really good topic that we want to talk about today. And I’m a bit excited by this one. It’s tapping into that entrepreneurial mindset. There’s things that the optimism that entrepreneurs are known for and they’re natural at, how that optimism can actually be a problem when you’re preparing for exit.
So, let’s dig into that and just go, what do we mean by that? Are you an entrepreneur? Is that a handicap for exit planning? Let’s dig in, shall we?
Yes, this is a great subject, isn’t it? And entrepreneurs have some great attributes. And sometimes those attributes can, there can be an excess of them making themselves obvious. And the real problem with business exit planning is that from our point of view, if we’re talking to people, is that the problem we can solve for people, they’ve not experienced it yet. So they don’t know of the pain.
And nearly every entrepreneur deals with a problem or a foreseen problem they can understand. And business exits typically isn’t a thing that they see as being an issue down the road. Hey, why should it be? They’ve been in business 10, 15, 30 years or whatever, and they can deal with anything. They’ve proven that.
Exactly. Let’s start right at the beginning. I don’t want to start off criticising entrepreneurs. We work with them every day and they’re fantastic. And these are the people that see something different in the marketplace. They’re busy being told by people saying, hey, you can’t do this. You can’t solve that problem. It’s unsolvable. And they’re the ones that say, stand back, hold my beer, watch me do it. And so they’ve got this drive, this energy, this passion, this…
Don’t tell me I can’t do it because there’s a solution there. They’ve got this energy that and optimism that will get them to start the business in the first place. They’ll create clients, a credible business. They’ll push through. These are the ones that push through the first year, the five years, the 10 years, and they’re still going strong and they’ve built a business. These are the people we’re talking about, aren’t they? These people are driven, passionate and build a successful business. What’s wrong with that?
Yes. Yeah, okay. So you’re right. Optimism is what gets these businesses going in many cases, people see a business and I was only telling you the other day, Darryl, wasn’t I about a meet and greets service at Heathrow, where a man had given up his bar studies, bar exam studies to start a meet and greets service at Heathrow, which by…
As in bar to become a barrister as opposed to a barman.
Yes, yes, just for clarity, for international clarity. And I met him, he actually was there when I came back into the UK. he’s spotted an opportunity in the market and he’s off and running. that’s the bias towards optimism that people can have. But at the same time, overly optimistic entrepreneurs, often end up launching ventures without sufficient research or preparation. And that can result in high failure rates. And there was a study by the University of Bath about five, six years ago, that talked about pessimism being something that entrepreneurs should try and focus on occasionally, because the over optimistic approach leads to failure to a significant level. And this study showed that optimists earn 30 % less on average than realists because they enter unviable ventures in some cases.
You’ve just reminded me, I’m going to get a little bit academic for a second. I think there was some research work done by Victor Frankel, who was the famous guy who did some research out of the Nazi camps and his research on the American soldiers who were either optimistic, pessimistic or more neutral. The optimists didn’t fare as well as we’d probably think they were. So, I think you’re kind of reinforcing research that has actually been done and out there, but it’s not intuitive perhaps. You might think that the optimist is always seeing the best and moving forward.
But there are some downsides to being an optimist all the time. So, where do we take it? We’ve got these business owners who are optimists, they’re driven, they’re high energy, they’re seeing solutions where everyone else is seeing problems and that enabled them to do some research and start a business and get it going. They’ve either created a new product or a new solution to a problem that exists and created a new solution that hasn’t been in existence before, or they’ve got an existing solution and taken it through a market access that hasn’t been tapped into before.
So, we’ve got these businesses that exist. Now, what are we saying here? Well, they’ve been building their business for 10, 20, maybe 30 years. They’ve taken it a long way. They’ve developed a really successful business. But what are the characteristics of these people? They’re forever solving problems. They’re looking forward. They’re coming up with a stack of ideas every day. They tend not to see solutions. They tend to be highly confident and they’re pushing forwards and it’s their confidence and sheer self-belief that has created a whole lot of the success for them. Do reckon that’s a fair assessment?
Yeah, absolutely. An entrepreneur solves problems, you’re exactly right. And the thing is they solve the problem when they recognise the problem. And so, they look for a solution. And quite often over the life of an owner started business that still runs 20, 30 years later, is they do forget how many times they did seek help from peers or… outside agencies or consultants or whatever, because it got to a pain point, perhaps they’re experts in production and marketing, but no good at logistics. And so perhaps they got in a logistics expert to help square things up so they could, they could carry on growing. And that’s good, because the business is trading, they know they can fund that sort of activity, and they know they can get to the end of it. the reason they asked for the help is they had the pain. And this is the issue with business exits in that
There’s an unrealised need for it. They’re not yet feeling the pain of an unplanned exit. And there’s also that kind of emotional attachment, fear of change, lack of awareness of the complexities involved, know, what’s the evaluation, succession planning, all those things. And it can lead to procrastination. And that in our experience, and also research shows us that it leads to procrastination that results in rushed decisions and reduce business value.
So, let’s tap into some of this unfiltered pain, shall we say, that we’re referring to here. Because what we’re saying is… exit at some point these people have realised these business owners are going. Hey, look, I want to sell my business I’ve come to the point the realisation that I do actually want to sell my business and They often have a valuation in mind that they want to achieve Whether it be because it’s just a goal number they want to achieve or whether it’s because it’s a number that they feel they need to achieve to continue living in the lifestyle that they want to live in post work and and not have to work again. So, a freedom number but it could be just because their mate sold their business and achieved a certain valuation and they’re aware of a multiplier and they believe that their business would therefore create this valuation. So they’ve got all these beliefs and expectations around exit. They’ve never done it before and most of them are only going to sell one business in their lifetime.
So, what they’re coming up against is they’re going to sell, they’ve got to make this mindset shift that their business is now the product that they need to sell. So they’ve spent all these years building the proposition for their product and how to address the strategic market, how to package their product, how to price their product, how to market their product and formulate all these strategies together into a proposition to make it attractive to their desired client.
And what they’ve never done before is think about their businesses in this way and go, what do I need to do to make my business attractive to my ideal client, the ideal client being the person or company that’s going to buy their business? How do I make my business an attractive proposition to be acquired? And if they’ve never done that before, they’re not aware of what’s required to make their business an attractive proposition to be acquired by someone. there’s, was talking to someone recently and we were started, as is always the case, we come up with the analogy of going, well, it’s like sewing your house, isn’t it? They said to me, I bought a rental property and I put a coat of paint on it, I might renovate the bathroom and the kitchen and make it more attractive. And I’ve gone, yeah, but you can’t relocate the house. That’s the problem with the house. You can’t relocate it. If you’re preparing your business to be sold, there’s so many more levers that you need to pull to make it a to be acquired because there’s a lot more moving parts and these are the things that if you’ve never sold your businesses before there’s just so many things you just don’t know what you don’t know.
Yeah, you’re dead right. Is the start point partly around there’s an assumption it must be simple. And I’m not saying it is complicated getting your business exit ready at all, but it’s more complex than selling a car or a house. And the lack of reference points that a business owner has when they’re selling their house is quite a problem. They’re starting in the dark if they’ve not done it before.
In the UK, if you want to sell a car, you’d look on Auto Trader or the Parker’s Guide, and you’d get a really good idea what your car’s worth, plus or minus 5%, really. If you wanted to sell a house in the UK, most of the time, you can get a pretty good reference point by going onto Rightmove. You can’t get that for a business. And so you alluded to the multiplier that a friend got for selling their business. They ended up being very singular and inaccurate reference points because businesses are so different. And the speed you want to sell it and the legacy you might want to leave, how you want to look after your staff and all those things, make it a new kind of pot of stew that is very different to thing they thought they were dealing with. It’s, you know, our experience is that if people choose to spend some time looking at these things in more detail, even if it’s only just getting a really, really good valuation upfront, if that’s all people did, they would end up getting a better deal out to the end of it. Because they’d start to see all those moving parts and see what impact has on the valuation.
And that’s a really, really good point there, Kevin, because getting evaluation from someone who’s not attached to the valuation, because you can get evaluation by someone who’s, you know got the, you can look up in a textbook and go, here’s how to value a business. You can get a valuation from someone who wants to sell the business for you. So, they’re probably prone to pitch high and seduce you with a number that’s a really attractive number and to give you the number that they think you want to hear. Or you can get a bit of valuation from someone who’s trying to look at it from how a buyer is looking at your business and having a look at all of the risks instead of just going, look, businesses in your industry sell for this model.
They go, let’s have a look at your business. Let’s have a look at the profitability because it’s a profit times a multiplier. But what’s the profit? We hear the term EBITDA, but where does EBITDA come from? That’s not in your regular monthly reporting. So what is the EBITDA number they use and then why are they multiplying it by and what are the things that influence that multiplier? And these are things that we’re all we’re doing is talking about the valuation now.
But we also need to factor in the terms of the deal. Are they going to say, yeah, we’ll give you that multiplier and that valuation? Sure, no problem. But to get that number, we’ll give you a little bit of the money upfront. And we don’t really think it’s worth that number today. So we need you to stay around and work in the business and work through an earn out for the next two or three years. And we’ll pay you the rest of that money over installments over the next two or three years as you hit those times and by the way, we now own the business. So, we own the goalposts. We can move them to wherever we like because we’ve got other business priorities as well. Your goals are not our number one priority. If you don’t do the preparation before, well, don’t do the preparation while you still own the business, you’re going to have a whole lot of risk exposure after you own the business post-execution.
Yeah.
And these are the things we want to mitigate as much as possible.
So I think one of the important things in business is the ability to make a decision. It’s to be able to go yes or no in the right way. And the trouble is if you go binary on things and you don’t have all the information, your risk of making a wrong decision going no or yes to something is quite high. So I think this is where the entrepreneur, if they delve back into what’s made them great and remember that curiosity was one of those things that really worked for them. They thought, aha, there’s an idea. They thought there’s a market, I’ve got a product that could put into it or vice versa. And being curious and ask some questions rather than going, no, I don’t need any help. Or I’ll leave that for three years. Why not spend a little bit of time every month perhaps? Going, let me educate myself about how I can exit my business. What does it involve? What’s the breadth of the challenge? Who are the players that are going to be at the table? You who are the experts I need? And what’s the buyer going to bring to the table? And thinking about how you can make the deal worth more to the buyer and worth more to you. And the curiosity that entrepreneurs are famed for can be a refocus. And I know it’s hard when people are going and going, you know what, I’m ready to be out of here going, now you need to learn a bit. But entrepreneurs need to remember that’s how they got where they were because they were curious. Reignite that hunger for knowledge and find out what it’s all about. That could be by talking to us, could be talking to all sorts of people. But make sure you get some unbiased views on what those parts are.
Think you touched on something really, really insightful there, Kevin. And if you do some exit planning and you start thinking about your business well in advance, you can start to think about what type of business owner person, who is going to be the buyer for your business. And if you’re, you know, part of it’s going to be based on the size of your business. Part of it’s going to be based on your timeframe. And part of it is going to be built on the intangible assets that you’ve already built in and implemented a part of your business. If you know who’s going to buy your business, then you can set it up to be more attractive to that person or that entity or that type of entity.
Now, what do I mean by this? Well, it’s a lot of us going to be having the right reports and the right structure and the right systems and processes that complement what they’re looking for. It’s about having the right management team and leadership team that are going to stay in and those that are going to want to go. Because if depending on who acquires your business, they may go, well, we’ve got a full leadership team. We don’t need that. Or it might be we actually want your leadership team because they can go on and do other things in our much bigger entity or organisation.
So, part of exit planning is thinking about who’s going to buy your business. Now, different buyers are going to come up with different valuations and valuation formulas of how they’re going to value your business. So, then you need to go, what are the things I need to do to make it more attractive to them?
And regular listeners of the podcast will have heard us say before that to get into this mindset, you need to evolve your mindset from profit growth to valuation growth. What are the things that grow the valuation and therefore attractiveness of my business? And all these things that increase the valuation will actually prepare your business to be more attractive to get deals, to create more competition for your business, and also set you up for a faster deal process. If you put all of these things in place and have an attractive business that’s prepared for exit, your deal will go through so much quicker because due diligence will be less painful because you’ve prepared it in advance. And they’re the sort of things we’re talking about. What sort of due diligence will you need to prepare for? What information will the buyer be looking for to give them comfort that the business meets their needs and is what they think it is or what it reports itself to be.
Yes, and it can be a very fun process. It helps you get back in touch with your customers, gets you thinking about your supply chains, get you thinking about your team and your processes. And we’ve said this before on the podcast, haven’t we, that some people, a minority, I do have to say, but a minority of people end up going, I was thinking of exiting because it was all getting too much for me.
And I was thinking, can I get enough to retire and all that stuff? And through the process of getting things running better and having better relationships with everyone in their business ecosystem, they go, do you know what? This is what I used to enjoy. A business running well, it’s earning me more money. Yeah, it might be more saleable now, but do you know what? I’m going to carry on doing this for a while. And we have seen businesses double, triple, quadruple their valuations through this process.
So, it’s a win-win whichever direction you go. If you’ve got your business running smoothly, ready for a business exit, you have got choices. If you wait until the last moment and get involved with a broker, you’ve got very little choice apart from paying them the fee and quite often having to reduce the sale price on the way.
Yeah, you don’t have time to adapt and make changes if you leave it too late. So, here’s a top tip. As an entrepreneur, you’ve been building your business and building your proposition. So you’re going, how do I, what’s my product? What’s this problem I solve for my clients? How do I position my proposition? My, problem I solve different to their competitors in the marketplace. What’s special about me and my product? So the clients will want to buy it and can give them the information to make a choice. How do I price and package it to, to match that positioning in the market? And then how do I reach those ideal clients, the people who have the problem that I want to solve. They’re the four key elements that make up your proposition for clients.
Now, here’s the top tip. Use those four tips and go, how do I, if I thinking of my business as the product now, how do I make an investor proposition or an owner proposition? What makes my, how do I position my business different to everyone else’s that they may be considering? What’s the problem I solve for them as a, business acquirer? What problem does my business solve for them? How do I price and package my business? Now that’ll be partly down to negotiation, but that’s the negotiation of terms and the packaging is who stays who goes over what time frame and what is actually acquired all those bits and issues and then how if you’re building it from a proposition perspective and thinking in terms of valuation well then you just go how do I reach them where are the right type of buyers or acquirers or investors that are looking for this combination.
Now, if you’re thinking about propositions for clients and then propositions for shareholders and owners or investors, then you might also want to think about propositions for employees. If you build a proposition and think about those four strategic elements for employees, chances are, well, we know they will, you’ll end up with a much stronger culture and a much higher employee retention rate that’s aligned to your vision, which just so happens to make your business more valuable.
And if you’re going to do a proposition for employees, then you probably also want to do a proposition for your suppliers. How do you get the right suppliers for your business? Because employees and suppliers are two things that are going to come under scrutiny in your due diligence. When people are looking to buy your business, they want to understand how aligned the employees are to your business. What is your employee turnover rate? Your churn? How capable are they? How skilled? How much do they follow systems? How, how vulnerable are you to or how much exposure do to your suppliers? Are they just transactional or are they strong relationships that will stay and don’t need any additional renegotiation? So there’s some tips for you to think about how do I build the valuation of my business?
Kevin, have you ever done that with clients and seen some bonuses?
Absolutely. Before I get to that though, I’ve seen the complete reverse where someone I know very well said, yeah, we can’t be doing all that Kevin. I go, look, we’re friends. I don’t want to have this conversation. And he went off to a broker and the broker charged them a load of money. And they said months later, why are you still not even categorising our business correctly on your website? That’s not what we are on and you put it in the wrong place. So, how’s it ever going to sell?
They said, well, if you to sell quicker, you to put the price down and pay us some more money to advertise it. That’s what happens if it gets down to the real end game. But you were talking about the positive things there about bringing it together by in essence, saying, let’s get this right for a great buyer and getting the team in the business, it 10, be it 100, be it a thousand people, getting them to naturally without really thinking about it to be in line with the culture and strategy on a day-to-day basis, making decisions without having to refer and making the right decisions dramatically increases the efficiency and effectiveness of a business. At the same time, I’ve done sessions where I’ve been growing and evolving a business where we’ve got every supplier in, every one of them and explained what we were doing and said to them, if you want to be part of that, this is what we want from you. It’s up to you, can walk away from us if you want. This isn’t an invitation to attend or it’s an invitation to come on our journey with us. This is what we’ll do for you. What can you alter or tweak or change for us?
Now, you understand our business better. And so these are sorts of things we talk to our clients about on our kind of five stage process of getting exit ready and it makes a business easier to run and more valuable. So why would you not do it? This is what I always find so intriguing and it takes a, with a tipping point in the conversation where people say, yeah, I get it. It differs for everyone. But as I said earlier, the point is entrepreneurs got successful through curiosity. Get curious when you start thinking about exiting your business and you’ll start wondering about all these things we’ve been talking about and perhaps it’s a conversation we should have.
Get curious about finding out. So you, I’m gonna, I’ve just got all this wrong, but you want to know what you don’t know. That’s, that’s what you’re saying, isn’t it?
Yeah, yeah. And you know, we do cups of coffee, and we do teams calls, we do face to face conversations. They’re great things. And you don’t need to be a client to have the initial conversation and go, okay, that’s for me. That’s good. I want to carry on my curiosity and do this, or get into that danger area where you say, well, I’m not leaving for three years, I don’t need to do anything.
It’s so important what you’re saying because the risk is if you don’t get this right You’re not going to sell your business only one in five get to sell your business and we’re so passionate about changing that number like how many business owners get to the point where they’re expecting, anticipating to do a deal and it’s just not attractive enough for buyers. They just see it as too risky and they run away. We want to change that. We want to help you change that. We want to point you at least in the right direction. So if you, want to find out, as Kevin says, hit us up for a cup of coffee, hit us up for a Zoom call, Teams call, there’s no risk. Let’s get you on the path to exit on your terms.
Kevin, another good one. Thanks for sharing your exit insights with us today.
Thanks, Darryl. Talk soon.
Cheers.
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.
If you would like to learn more about how to start preparing your business, then you can get more information here: https://page.succession.plus/it-all-begins-with-insights-exit-insights
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