Exit planning is one of the most important things a business owner can do—but too often, it’s pushed aside for “later.” In this week’s Exit Insights podcast, Kevin Harrington and I explore why business owners delay getting their businesses exit-ready and how to overcome these hurdles.
The Cost of Procrastination
We often hear, “I’m not ready to leave yet,” or, “It’s just not urgent right now.” But waiting until you’re ready to leave can leave you without enough time to eliminate risks or increase your valuation.
Key Takeaways from This Episode:
- Separate Yourself from the Business: Buyers are looking for a business that can thrive without its owner. Creating a strong leadership team and reducing owner reliance is crucial.
- Mitigate Risks: Clean financials, sustainable operations, and strong systems make your business more attractive and valuable to buyers.
- Start Early: Think of exit planning as a long-term investment. The earlier you start, the better your outcome will be.
Practical Tips:
- Focus on valuation growth, not just revenue or profit.
- Plan your business to run without you—so you can enjoy a smoother handover.
- Consider future buyers and start addressing potential deal-breakers now.
Ready to get started? Subscribe to our newsletter for more tips, or listen to the full episode here.
Watch the episode here:.
Welcome to the podcast dedicated to helping business owners prepare for exit so you can maximise the value and then exit on your terms. This is the Exit Insights podcast presented by Succession Plus. I’m Darryl Bates-Brownsword and joining me today is my business partner, Kevin Harrington. Kevin, welcome to another week where we are exploring all sorts of things around helping business owners reduce the risks of selling their business. Today, we are going to focus on the topic of why do business owners postpone or delay getting their business exit ready? So there’s a good one. What do you think?
Wow, this is a very interesting topic, isn’t it? I’m gonna get one thing off my chest straight away, I think, around this one. it’s, we’re probably guilty of it occasionally, but we are aware of it. But I think far too many businesses, their day, their week, their month is driven by Microsoft or anyone else or or anyone else you choose to use to run your diary or your inbox and so forth. What happens is, I’ll stick to Microsoft because you know I love them dearly. And what people are able to do is stick appointments in your calendar. They’re able to fill your inbox up with questions. Sometimes it’s people trying to sell things to you or sometimes it’s a customer that’s got a problem. And then when a business owner sits down, their immediate perspective is the screen.
I mean, we’ve got more than one screen when we’re working and this agenda is set out and it’s not our agenda. The agenda is being set by other people. Now, I’m not saying those things shouldn’t be looked after at all. Of course they should be looked after, but that’s working on the business. It’s not sorting out the strategy for your business and its future. So this is really important for running a successful business as well as business exit. You cannot allow your inbox and your diary to be setting your agenda for you.
So we’re talking about getting some focus right and structuring our day in and where we should be allocating our time and what we should be working on. So there’s part of it for sure. Like let’s get clear of our role and get ourselves out of the business, out of the operational side of the business. But even when you’re just working in a strategy role, you’re still going to get emails thrown at you every day and a whole lot of crap that you’re just not expecting to deal with.
Yeah, absolutely.
So we can’t blame Microsoft or Google or the world we live in. I think we need to go, OK, so how do we deal with all that rubbish that we’ve got landing on our plate every day? Because we all deal with that every day.
Okay, we’re nearly agreeing with you on how we can’t always blame Microsoft. What does happen though is that if someone has a conversation that says, what’s your plans for exiting your business? Let’s just imagine someone’s been running their business for 25 years, they’ve got 20, 30 staff perhaps, it’s all going very well. And they go, yeah, but I’m not ready to leave my business just yet. And actually I’ve got all this stuff that Microsoft’s delivered to me to do. And…
I’m busy.
It’s so easy. It’s so easy to procrastinate and use a really good excuse, I’ve got to get on with my my immediate to hand stuff. And so I think the first issue in very genuinely is procrastination. It’s people people can very easily put off because I don’t need to leave my business just yet. I don’t leave for three years. How many times have you heard that?
I’m not ready yet. I think you bang on there. It’s that that sense of urgency versus importance, you know, because they all go, yeah, it’s important to get my business ready for exit, but I’m not interested in leaving for another two, three, five years. So I don’t have to do anything yet. And I think that’s a trap. And I think it’s and you’ve alluded to, you know, and I can always find time to fill my day with other daily what appears to be more important stuff or more urgent now rather than important. And that’s the same as the exactly the same conversation you have with business owners to get them out of the daily, the operational side of the business. And you get them out of working in their business to working on their business or, you know, running the business rather than the business running them. So it’s the same skill set of extracting yourself that 30,000 foot view or
Well, let’s just keep it in simple English of going, what really is the most important thing I could be working on today? And I think that’s when we’ve got when business owners start to evolve their mindset from profit and revenue growth to thinking about valuation growth. If they start thinking about valuation growth, they can step back of the immediate profit. I’m not saying you need to neglect profit.
But if you have the aspiration that one day you want to sell your business and you’re thinking about, know, I want to get as much money as possible to top up my pension pot, my superannuation, whatever it is for you. you know, and it’s not all about maximising the returns a lot of people tell us, but having built something, you want to get as much as you can for it, right?
It’s not about minimising the money. that doesn’t mean if you’re looking to maximise the valuation doesn’t mean it’s at the expense of of something else. It just means you want everything else lined up, which means if you’ve addressed all of the risks in your business, that ultimately you will maximise the valuation and you will look after the employees and you will have a legacy that’s there.
You’re dead right. And what was going through my mind when you were speaking there though is that we work with some excellent, some lovely clients. And the ones I’m pretty sure both of us enjoy working with the most are the ones that are running businesses that are already good.
Yeah.
They’re delivering great quality, great value to their clients and have been doing it for a long time. They’re good in their community. They look after their staff, the whole thing. But it has to be said, the one thing that most of them have not done is sold a business before. And it’s very easy at thinking I need to sell in three, five years to think, it ain’t that difficult, is it? Because I can just chuck it across to one of these &A business sales people I can find on Google and what have you, jobs done. But the hard reality is that that never maximises the value that just possibly sells the business. What we’re talking about is some of the clients we’ve worked with where in the two years perhaps we will work with them in getting that business exit ready. We’re seeing valuations grow by one, two, three, four million, those sorts of things. And why would someone say no to that value growth? They’re not really saying no to it. They don’t realise it’s a possibility because they’re running a great business and that’s their focus.
Yeah. And maybe, maybe it’s back on us, Kevin, maybe we should instead of harping on about maximising value, because maximising value is the outcome of all the good work you do of getting exit ready. And what do you really, what is it you need to do to maximise the valuation? Well, if you eliminate all the risks of buying a business, if you mitigate as many of those risks as you can, the outcome of mitigating those risks is that you’ll have a higher valuation. Now, when it comes to mitigating risks of buying a business, you also want to be mitigating the risks of selling the business. So it’s two sides of double-sided market. think you’ve referred to these things in the past and you’re looking after yourself and the potential buyer. And when you do that, you’ve mitigated the risks. What is it you have to do to mitigate the risk? The benefit of mitigating those risks of buying and selling the business is means the handover will be a whole lot cleaner for you. You and it’s the biggest thing that I love doing is, is that if we can minimise any sort of earn out arrangements, deferred payments are no problem. But if you can minimise the requirement for you as an owner to have to keep working in the business, to have to be involved in the business when someone else now owns it, then then you’re going to get a higher valuation.
And I’m not talking about the situations where you do a deal with a PE company and part of your strategy is that you do maintain your CEO role or you can’t take a role in the bigger entity. I’m talking about those situations where you’ve sold your business, you want to move on to something else, but the terms of the deal and the risk of the deal meant that you had to stay on and work and earn out to get that valuation.
Yes. You talk a lot about risk there and again, it’s good fun these conversations because it triggered another thought in my mind in that for so many business owners, they feel they are the business and the business is them and it’s one thing. And what we’re actually asking people to consider initially, not necessarily act on things immediately, is to consider the fact that the business is a separate entity.
When someone buys it, they’re buying the business, they’re not buying you. And the moment you start looking at the business as a third party thing, as an entity, you can be less emotional around it. So this business I’ve got here, how do I make sure it carries on providing a living for me, my family, my staff, all the whole team and so forth? How do I ensure it carries on looking after customers well in a slightly more dispassionate way?
Yeah.
That’s the early stage to going, hey, let’s run this thing like I’m never gonna be here. Let’s make sure I’ve got a leadership team that is in the business that can run it quite happily if I’m away. If I was to sell the business, the new business owner would come in and go, yippee. This is predictable revenue with this great strong team here. And as I said at the beginning of this statement, it’s around saying, you are an individual, your business is an entity. Now let’s make sure they both work in harmony, not completely as one entity.
Yeah, so you’re separating the business from the owner and that fits in nicely when we say we need to get the business exit ready and you also need to be exit ready. The business needs to be exit ready when you’re ready to exit, which I guess also touches on one of the other reasons why people want to delay getting their business exit ready because they say, well, I’m not ready to leave, so I don’t need to get the business exit ready. And there’s a suggestion there that maybe there’s a belief that it doesn’t take long to get a business exit ready. And when we’ve been talking about eliminating all those risks, one of the risks is you want some good, clean financials. you’ve got them, the longer you’ve got of clean, positive financial records showing a pattern of growth, ideally, you know, and those financial records will stand up to due diligence and a bit of scrutiny, then we know that that’ll improve your valuation and improve your exit transition. One of the issues of being not ready yet is, well, just because you’re not ready doesn’t mean you shouldn’t get the business ready. And you can get the business ready so it’s ready and waiting, so to speak, for when you catch up, for when you’re ready. And the benefit of doing that is that the business is typically more profitable and it’s an easier business to run. And there’s another benefit there that while I’m on this soapbox is that a lot of business owners we talk to go, yeah, but I just want to get the business ready. And you know what? The business is always for sale for the right price. And here’s one that always makes me smile. The business is for sale for the right price. I go, what’s the right price? And they’ve never actually thought that far into it. So what is the right price? Well, if you get the business exit ready, you’ll have a realistic valuation of the ballpark of what the right price is.
But if the business is exit ready and someone does come unexpected or out of the blue and have a conversation and make an offer for your business, if it’s ready, you know it’s going to get through due diligence. And if it is the right price and it’s worth, you know, they’re making an offer worth more than what your ideal or your aspirational number is, then you know there’s nothing that’s going to stop that deal going through because everything’s ready. The only thing that’s going to stop it is you, the owner. So, yeah, there’s another thing. You know, I’m not ready yet. Yeah, but you should still get the business ready.
Does this analogy work for you, Daryl? Let’s imagine it’s not business exits. This is wanting to have a great career. And so you’re looking for a job that requires you to have a degree and the job comes up and you say, I’ll get the degree sorted out then. You don’t do that, you do that in advance. And the degree took you three to seven years, depending on what the discipline is. Let’s call it three years.
Let’s have a look.
But to do that, you had to do two years of sixth form. To do that, you had to do five years of GCSEs. And the point is, all of that was to make sure you had the degree to get the job you wanted. There’s a whole set of very logical processes that for the individual, you’re adding value to the individual through qualification, through the GCSEs, through the A levels, through the degree. And then you’re ready for that big, big job that you’re after down the road, perhaps.
And perhaps that’s a good analogy because people could understand that. But the business exit piece isn’t just having high scores on TrustPilot or CheckerTrade or whatever it might be. Having a business exit ready is exactly as you described it, is getting rid of all those risks and making a business sustainable and manageable. And they’re the GCSEs, they’re the A levels, they’re the degrees in that comparison. And as you do all those things, getting it ready, you’ve learned more, you’re running the business better while you’ve been getting ready for exit. So you naturally make more money, that’s what usually happens with our clients, but you are exit ready for the time you want to do it. And actually the person that first knocks on the door and says, yeah, do want to sell your business? He’s rarely offering the best price, but you’re in a position to explain why it’s worth a lot more at that time.
Yeah, exactly. So yeah, I think that works because if you know you want to be a doctor or a lawyer or whatever it is or an engineer and you want to go down that certain career path, then you know to get into uni, you need certain grades, as you suggest. And you need certain subjects. you need to get your A level grades.
You need to get the right grades in GCSE to get into the A level grades to get the right to get the right subjects and be able to pick the right subjects. So, yeah, I think that analogy has got legs.
You know, you go through all that path and the children still don’t leave home. You don’t have to sell your business. You get to the end of it, you don’t have to sell your business. But you are running a more efficient and effective business that’s usually more pleasurable. But should you want to for whatever reason, anything from death of a business partner, divorce, a desire to go and tour the world, you’ve got the choice. And this is what is such a common theme amongst the the great clients we’ve got is that they are pretty determined individuals. They want to do what they want to do. So when they get around to saying, do you know what, now’s my time to live a bit and to do X, Y, Z, they’ve got some choices.
Yeah. And as you say, it’s not about leaving the business necessarily. It’s about being able to and, or, you know, go and take a more than one, two, three week holiday at a time if you want. And it’s, yeah, it’s one of the things we do is, is get business owners into that chairman style of role. That role of where you’re running the business by remote control, you’re not in it. You may be still working full time, but you’re focusing on the strategic side of things.
And whenever you’re on the strategic side of things, the impact of the work you’re doing is gonna hit the business in 12 months time, six to 12 months time. Which means you can have a holiday, which means you don’t have to work stupid hours just to keep the doors open and keep the business moving. The work that you did 12 months ago is what’s keeping the business running well today. So…
But this conversation is about, started off with how, why do people put it off though? And we’re talking about the benefits of getting involved in it. And hopefully this helps, helps people see that this is a natural thing to do. But it is a crying shame that people can kick the can down the road and not worry about it. And then suddenly have no choices.
Yeah. And it all comes back to, you know, I’m just mentioned talking about, you know, the work I do today is going to hit the business in six to 12 months time. If I’m working on the business rather than in the business or in that chairman role or in the strategy or CEO role, depending on the size and scope of your business of how you see that role. It’s just like any other growth of the business. know, I, you know, business owners say, well, yeah, I’m not ready yet. And, and it’s also working on the.. It’s not urgent yet, Darryl. It’s not urgent for me to start preparing the business. So we’ve covered those. think one of the other or another big one that business owners say, well, I’m not going to get the business ready for exit yet is because I can’t afford to leave yet. And I’m not ready yet because the business isn’t worth enough. And when we dig into that comment, it’s normally related to the profit and they see the only way to increase the valuation of the business is to increase the profit. Now, absolutely, that’s one way to get the valuation up, increase the profit. But if you’ve increased the profit of the business, but it’s because of your hard work and you went and did a whole lot more sales or you’ve delivered a whole lot more client work or have, if that increased profitability has come down to you being involved in the business, it’s only gonna have a minor effect on the valuation. You need to be looking at all of those intangible assets and you can increase the valuation of the business without even increasing the profit. Now that’s well and good and easy to say. Every business owner has an aspirational value and it’s worth checking in and going, okay, for that aspirational value, is the working doing some reverse engineering and going, what does my business need to look like to achieve for it to be worth that aspirational value. What’s the multiple that needs to achieve and what’s the adjusted EBITDA number that needs to be achieved for it to be that valuation. And then you can have a realistic conversation or realistic perspective.
You mentioned the word conversation. I mean, that’s actually a big part of this. And the types of clients we work with, which wander between tech companies and not huge numbers of those, but a few. then there’s construction, engineering businesses and a lot of B2B professional services, that sort of thing. They’re all…
waiting for the right conversation. And they don’t, they don’t have to know anything about business exits to start the conversation. And, and in America, it’s different, isn’t it? We have a fair amount of business activity ourselves in the States. But it’s a known thing in the US, it? Business exits is an industry in the US, in the UK, people think it’s all a bit kind of hocus pocus. But it’s not. If you want your tax affairs sorted out, you use an accountant. If you want to sue someone through the courts for breach of contract, you don’t get your dummy’s guide to law, you go and talk to your solicitor. And all we’re saying is if you want to exit your business, talk to people where they do that. You know, now our gigs all about succession planning and getting businesses exit ready so they can leave on on their terms as we keep saying. So have an initial conversation like you would with a lawyer. Get the conversation going, find out what the extent of the job is.
Yeah, so you know how big the apple is, or the elephant is that you’re going to bite. And so you know what the requirements are. It’s better to get clear than to make some assumptions. Because one of the big ones is if you’re to do some tax planning, you want to know what the tax implications are. And out of all the previous episodes where I’ve interviewed tax experts, the common theme is well, Darryl, if only my clients, all of my clients came to me, you know, 12, 18 months before they intended to business, before they started to put the business on the market, we could have restructured the business and we could have made it a less risky again for acquisition for the buyer. And we could have reduced some risk and also some, some tax consequences for, for the founders, the owners of the business. So it’s understanding what the outcomes are and what is required to achieve some of those outcomes because some of them will take a big chunk of time. And you talked about conversations. Yeah, absolutely have conversations with the professionals who people who deal with this day to day, not your mate down the pub who may have sold his or her business and done it once and maybe even got lucky because sometimes there’s a bit of luck involved in getting a great value, but just because they’ve sold one, it doesn’t make them an expert. There’s always traps for new players. yeah, that’s just that caveat there of who to talk to. one of the things of why people delay preparing the business for exit, let’s get some conversations going to talk to the right people. And then that addresses, I guess, one of the next fears is business owners don’t know where to start. Just pick up the phone.
We’re always having conversations where we just start to have a conversation with business owners and go, here, this is what you need to do. Like subscribe to our newsletter. I’ll put a link to the newsletter in this episode because if you subscribe to our newsletter, we’re always sharing information about what are some of the different elements linked to exit planning and how long it takes to do and what risk it addresses for you and how it can improve the valuation. So yeah, where to start is another reason why people don’t get started. They don’t know where to start.
And we’re always saying yes to a cup of coffee or a mug of tea.
There’s another one. so we’ve talked about people don’t know where to start. We’ve talked about they’re just not ready yet. They’re not ready to exit, so they don’t see any any driving force to get the business exit ready. We’ve talked about the feeling that it just doesn’t feel urgent. I’ve got enough on my plate of urgent stuff that’s stealing all of my time now. But we talked about if you if you prioritise your work, you can get yourself out of the day to day and have the business working for you rather than you working for the business. We’ve talked about getting in the right roles of the business and getting yourself into the chairman role. What else is on your list there, Kevin, that you see as reasons why business owners delay getting the business exit ready?
You’ve raised the major ones, the only one I would really choose to add to this list is fear. Business owners, once they get to a stage, sometimes in our experience, when they realise they do need to do something, there is a fear around it, the fear it’s not gonna work, the fear they’re gonna end up not the business, it’s not gonna look so good.
That’s very understandable, isn’t it? But it’s really very much a fear of the unknown that’s going on. Make this a known thing. Understand it like you understand your own industry. And then the fear dissipates. And then you can do what you want to do, which is you can be in control of the process. And businesses like Succession Plus, we don’t take control of the business.
It’s still the business owners, they’re running their business. What we’re doing is help guide them in a slightly different direction with value increases and they’re in control.
Yeah. And they’re driving the process. And I think fear is a big one because it’s fear of the unknown and fear of what’s next. If they’re not sure of what they’re moving on to and the business has been a big part of their life for so many years, it’s kind of what happens now. Like what will happen to the business without me? What will happen to me without the business? So there’s a big fear associated with that.
I think we also need to discuss that how hard can it be is, you know, lot of, sometimes we talk to business owners and they think that all that’s required to get the business exit ready is to just take it down, get their accountant involved and just knock the financials into shape and just tidy them up a bit for, and review that over the next couple of years or the last couple of years. There’s so much more to it than that. Getting the financials in shape, I think it’s worth noting that if you’re selling your business to a buyer, it’s in all likelihood, the buyer is a bigger business than you. And it’s not unusual for that buyer to have bought more than one business before. So they know what they’re doing and they’re going to look through when they do due diligence, they’re going to look at your financials fairly quickly and they’re not going to be conned or bluffed and buy some, a quick bit of clever accounting to tidy things up a bit and try and disguise some bits and pieces.
Yeah, it’s not just a quick and dirty to slap things into shape. And it’s probably worth mentioning at this point that the sort of businesses we’re talking about and the ones where we add the most value to or the best value to are typically those businesses in the one to 30 mil revenue range. you know, they’re an established business. They’ve got a bit of a management team or they’ve got a leadership team. They’ve got a couple of layers of employees. They’re the businesses where we can add the most value. So, we don’t work so much with businesses where it’s an owner and a number of helpers. And there’s often a big gap between the ownership of the owner and then the next layer of employees. There’s often a big skill and responsibility gap. We, you know, for the right businesses, we can help close that gap. But, you know, we’re talking about the businesses where they’re already doing a mil and above in revenue and, you know, tend to be in that one to 30 revenue range. And why one to 30? Well, yeah, there’s a fair amount of research that we’ve done and we’ve explored that, you know, the business needs to rebuild all of its platforms and infrastructure every time it triples in size. And that one mil turns out to be one of those inflection points. one, know, triple times one is 30. Sorry, triple times one is 30. Triple times one is three. Just checking my own Maths there. But that section between one and 30 is where we do our best work and have a big impact. And so that’s several changes of infrastructure requirements through that journey.
Yeah, that’s a good point that Darryl. I think that should be one of our next podcasts talking about this tripling effect and what happens. And it’s a very interesting subject that we should share our views around that one on a future episode.
Dig in. So why don’t we leave it there for today, Kevin. Let’s plan next week. We’ll talk about what are the infrastructure changes and what are the changes and the inflection points that a business goes through between that one and 30 mil revenue range. We might quickly cover the naught to one. And if you’re in that range as a business owner, some of the things you can do and yeah, how do you increase the valuation in that size of business as well?
Yeah, that’d be good.
Brilliant. So I will wrap it up and go, look, we’re going to put in the show notes. Have a look at our newsletter. If you want to get more hot tips like this, regular tips pointed, we’ve got a truckload of articles and blogs and papers on our website and a whole archive and history of past episodes where we’ve had some great conversations. So please do like this video or this podcast and leave a review if you’ve got some value out of it and be sure to get the next episode. Thanks for joining me today, Kevin. Have a good week.
Yeah, thank you, you too.
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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