Neil Armstrong once said, “You only have to solve two problems when going to the moon: first, how to get there; and second, how to get back. The key is don’t leave until you have solved both problems."
In the excitement of starting a business, it’s common to spend a lot of time thinking about “how to get there” – that is become successful. Often what’s given less thought is “how to get back” – i.e., the business exit strategy.
In this article, I'm going to explain how to set your business up for success. It'll take planning, and this takes time. You might want to check out these time-saving strategies.
Then you need to market it. But not just any marketing will do. In my new 1-Page Marketing Plan Course I show you the exact techniques I've used to start, grow, and exit several multi-million dollar businesses, so you can too.
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When starting a business it’s important to think clearly about why your business exists and plan for how you will exit. This sounds obvious but is something many business owners don’t think about until it’s too late.
Answering some of these questions will help you visualize exactly who your buyer is and why they would buy you.
It’s crucial to think about these things at the beginning because they will help you shape exactly how you engineer your business and what you focus on.
If your goal is to exit a business for $50 million, then everything you do in your business can be framed with the question: Will this help me get $50 million?
You’ll rarely make as much money running a business as you will selling one.
The person or company who puts you out of business is your ultimate customer and satisfying them will result in the biggest pay day you’ll ever receive.
Countless fortunes have been made this way. However sadly a very large number of businesses are worthless and eventually just get wound down because the owner wants to, or has to, move on and has not been able to secure a buyer.
This is why it’s so crucial to structure things in a way that ensures you’re on the receiving end of a big pay day rather than faced with the realization that your years of hard work have come to naught as far as the value of the business is concerned.
Over the years I’ve sold multiple businesses and now as an angel investor I’m on the other side of the table – evaluating businesses I feel would be worth buying into.
I can tell you the number one thing a purchaser looks for and that you need to satisfy is whether you HAVE a business or whether you ARE the business.
There’s an enormous difference. If your business can’t be operated without you, then it’s not a saleable asset and you’re stuck – regardless of how good or profitable it is. That’s why business systems are so crucial.
Having good business systems is what enables the business to run without you. See the following articles for more detailed coverage on the topic of business systems:
Next, you need to consider who will buy your business and why. Will it be a competitor? Someone new to the industry? Someone in your industry but in a different niche?
Structuring the business with a logical acquirer in mind is smart and it’s something that is attractive to investors. It shows them a clear path to exit and return of their invested capital. Even if you don’t plan to take on investors, as the owner of the business, you should think of yourself as an investor.
You wear the entrepreneur hat by day but at night the investor hat should come on and you should be questioning when that return on invested capital is going to occur and how.
This is one of the most common objections I hear from owner-operators. Very often they say, “I love what I’m doing and I don’t intend to sell.” That’s great if what you love doing is making you a good income – relatively few people enjoy such a lifestyle.
But whether you like it or not, one day your circumstances will change. You may get bored, get sick, want to retire, see a better opportunity, etc. When, not if, that time comes and you do decide it’s time to sell, you want to be able to walk away with a cheque that has a lot of zeros on it rather than have to wind it all down and possibly end up in debt or sell for a pittance.
If you start thinking about structuring for exit at the time you need to exit you’re toast. It’s way too late and you’re very unlikely to achieve a favorable result. You need to start with the end in mind. Start thinking about your ultimate customer and what would motivate them to write you that cheque which becomes your biggest pay day.
If you enjoyed this article, you may also enjoy our article on What is Direct Response Marketing & Why It Works? As a small business owner, it’s the smarter way to market your business.
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