Business Exit Planning: The Starting Point

Summary

Welcome to the inaugural episode of "The Value Builder Series," a special nine-part series on the Business Owner Breakthrough podcast. This series is dedicated to helping business owners understand and enhance the value of their business. Whether you're planning to sell your business in a year or two decades from now, setting up your business for sale is crucial for long-term success. In this episode, Pete Mohr introduces the importance of exit planning and offers insights into why building value is essential. Pete walks through the eight key drivers of value that will be discussed in upcoming episodes and explains how to get started with the Value Builder assessment.

Key Takeaways:

1. Exit Planning is Essential: 50% of businesses transition unexpectedly due to unforeseen circumstances like death, divorce, or partnership disputes. Planning for exit ensures you're ready for any eventuality.
2. Value Over Revenue: There is a big difference between growing revenue and growing the value of your business. Building value creates a scalable and sellable business model.
3. Eight Key Drivers of Value:
   • Financial Performance: Accuracy and clarity in financial records.
   • Growth Potential: Future prospects of the business in the market.
   • Switzerland Structure: Independence from any single customer, supplier, or employee.
   • Valuation Teeter Totter: Balancing cash flow and business value.
   • Recurring Revenue: Ensuring consistent revenue streams.
   • Monopoly Control: Owning a niche market.
   • Customer Satisfaction: Ensuring a loyal customer base and proving it with metrics.
   • Hub and Spoke: Reducing owner dependence in the business.
4. Value Builder Assessment: A tool that helps you evaluate your business against these eight key drivers to understand your current standing and identify areas for improvement.

Action Items:

1. Take the Value Builder Assessment:
2. Visit

Are you looking to make some changes in your business and your life in 2024?  Head over to speaktopete.com and book a chat with me to see if we're the right fit!

Maximize Your Business’s Value with the Value Builder Assessment!

As a business owner, do you know what your company is truly worth? The Value Builder Assessment is a powerful tool that helps you uncover the key factors influencing your business’s value. Whether you're considering a sale, planning for the future, or simply want to grow, this assessment offers actionable insights to increase your business’s worth and appeal to potential buyers.

Don’t leave your business’s future to chance. Click here to take the Value Builder Assessment and start building a more valuable, resilient business today!

Book a no charge Freedom Call with Pete, to see if you’re a good fit for his business coaching or talk to Pete about speaking at your next event head over to http://speaktopete.com to find a time that works for you!

Pete's Websites:

Pete-Mohr.com
The Exit Ready Business
Kolbe Coach
Simplifying Entrepreneurship

LinkedIn at https://www.linkedin.com/in/petemohr/
Instagram at ...

Transcript

0:00

So excited to be back here on the business owner breakthrough podcast with you. And we are going to kick off here a wonderful series all around building value in your business. It's going to be a nine part series. This is going to be episode number one. And we're going to kick off next week with the eight drivers of building value in your business. It's all tied to the value builder score, and I'm an accredited value guide as well as a certified exit planning associate. And a lot of the work that I do is helping people set up their business for sale. Now, whether you're ready to set up your business a year from now, five years from now, or 20 years from now, setting up your business for sale is just good business strategy. And I'll tell you a couple of reasons why. One, about 50% of the businesses in North America either transition, get sold or close, not because the owner wants them to, but because they have to. You know, there's death, there's divorce, there's distress, there's partnership disagreements, there's all sorts of things. And you may be listening to this thinking about one of your friends in business that these have happened to, and it's caused significant changes in their business, sometimes to the point where they have to sell it or close it or do something with it that they didn't necessarily want to do the other 50% transition, because there's a plan to transition, whether it's retirement or whether you want to start something new or whatever the case is. But one thing is for sure, you will exit one day. Exit planning is just good business strategy. But when you do exit your business, don't you want to have the maximum amount of value built into that business so that you can take that value and use it however you want in your life? That's why you got into business in the first place, isn't it? It's because you wanted to create that better life. And the value of your business may be able to create that better life for you. Whether, like I said, that's in retirement, whether it's for you to go on, take this business and take the money from this business and plant it into your next venture because you're ready for a change. It really doesn't matter whether it's you're handing it down to your kids. You want it to be set up in the best possible way for transfer. And that's what the value builder system that we're going to be talking about here over the next few weeks is all about. It all kind of starts with the value builder score, and I've just set up a website. You can connect to it@theexitreadybusiness.com. so it's over@theexitreadybusiness.com. and on that you'll see, you know, click to take your value builder score, which you can do. It takes about 1520 minutes to go through it all. There are some numbers questions there at the end which you don't have to fill out. If you choose not to. It will give you your score on the eight key drivers for building value in your business. And if you do want to go ahead and finish off and put in the numbers that it's asking for, then it's also going to give you a range of value, just a very brief sort of overarching range of value of what your business might be worth today. When you take the assessment, I'll reach out to you to go through it with you and make sure that you understand all of these different pieces. But one of the ways to understand it is just listen here to the business owner breakthrough over the next few weeks as we go through these key drivers and what they can mean for you in building value of your business. You know, one of the interesting things here too is that over 55,000 business owners have already taken this assessment. So it's statistically proven and it's already increased company's value by up to 71%. For all of the different things that we go through to kind of say, hey, you should be looking at this piece of your business or you're really doing this piece. Well, let's go into some of these other pieces so that we can increase the value over there. But it all starts with understanding what the value is so that we can do the work that we need to do in order to increase that value over whatever period of time. Some people want to exit quickly, it's a year, some people, you know, two to five years, other people 20 years down the road, depending on where you are in your journey. This is just good business strategy. If you're not ready to take the value builder assessment, just slide on over to the exit ready business.com and you can download the book. It's called the exit ready checklist and it's just a quick little PDF book that you can read and sort of get familiar with as well and do the assessment maybe down the road at a later date. There's a very big difference between growing revenue and growing value in the business. You know, revenue is very important, don't get me wrong, but it doesn't necessarily equate to a sellable, scalable business. Right. You could think of an owner who really grew their revenue, but struggled to sell because the business might have been too reliant upon them, right? They were the ones that were making all the decisions. Everything was happening. They were the principal salesperson. They were the principal person that gets stuff done. You can think that if I'm trying to sell this business, or if I was the buyer of this business, I would be very concerned that I wouldn't be able to duplicate that. Right? That's just one example. The idea here is that when we create value in our business, we're creating freedom both for ourselves and for our future. And that freedom, the time freedom, the financial freedom, is going to be able to set us up for a better legacy when we sell our business or when we exit our business. Remember, you will exit your business one day down the road. So let's dig in quickly to the key drivers. We'll just kind of hit them here, and then we'll have an episode on each one of them as we go through the next series of eight more podcasts. And it all starts off with, number one, the financial performance. Of course, financial performance is important in the valuation of your business. But also think, you know, it's one thing to have financial performance, it's another thing to have clarity in the numbers. So, so important that anybody looking at your financial records can understand them and them without question and with ultimate confidence, right? Number two is the growth potential. What's the likelihood of your business? Let's think about something like blockbuster. For those of you that are old enough to remember blockbuster, you know, where you went in and rented videos to pop in your vhs. The growth potential of that business is not so great these days as everything is downloaded online. I mean, those it's done. So what is the growth potential of your business in your marketplace, with your customer base? Right. Number three is called the Switzerland structure. Kind of a different name, but basically it has to do with around what's the independence? And this, the Switzerland structure is built built on the idea that Switzerland tries to remain independent from all other sort of countries. And the idea here is that is your business independent from any single customer, any single supplier, or any single employee? If those. Either your, your biggest customer represents a large portion of your business, your biggest supplier represents a large portion of your business, or one employee is such a key person that if something happens to that employee, whether that's you, or whether it's a right hand person for you. Those are problems and things we need to work through. Right. Number four is the valuation teeter totter. Balancing your cash flow and value is such an important thing. I'm sure you've heard it before. Cash flow is king, but cash flow can also take you down. So understanding cash flow and balancing it within the value of the business, a very important piece. Number five is recurring revenue. And this one can really add the biggest multiples in a lot of cases. When you start thinking about what are the chances of my clients coming back to buy? Really interesting. A lot of businesses don't have a recurring revenue model. How can we look at creating one so that it's going to create more value in our business? Number six is monopoly control, being the market leader or owning a niche so important now you can own a niche in a given market, in a given geographical place. There's lots of ways to own your area of business. And how is that laid out and is it clear? Number seven is customer satisfaction and building a loyal and strong brand through your customer base. And are you tracking it? Is there ways that you know that you are providing the customer? Everybody says they're great at customer service, but are there ways that you can actually prove it to somebody who's looking at your business? And number eight, which is often the biggest one for a lot of small business owners that cause business deals to go down, his hub and spoke. Are you the hub and spoke of your business? It's all around reducing owner dependence in the business. If we improve each of these, even by a slight bit, we're going to end up getting way more multiple, we're going to build more value in our business and it's going to be so much more attractive to a potential new buyer. Over the last few years, I've been working with many next generation groups as we trend to help them transition in the family business. And you know, whether you're transitioning into your, into the next generation of your family business, whether you're transitioning to someone else, all of these things, you don't want to hand over your business to your kids, that is not running the way you want it to. And at the same time, if you're not transitioning to the kids, think of the value you're leaving on the table at that transaction date, whenever that transaction date is. If these things aren't in order, if you want some reading material, just head on over to the exitreadybusiness.com and click that button to download the exit checklist ebook. And if you're ready to dig into the value builder assessment. The buttons right there in the upper right hand corner and throughout the website too, where you can answer in about 15 minutes or so some simple questions around your business. And we'll put it into the value builder assessment to give you the scores that you're looking for, the things that you're doing fantastically in your business, and the things that, you know, probably need a little bit improvement so that you can build the value in your business over the next few years. Sometimes some of these things take time, but there's always a few things that are low hanging fruit that can be picked up very quickly. Building value in your business as quickly as you know, a couple of months in the cleaning up some systems and process and clarity and all of these different things. Lots of good stuff to come here in the rest of this value builder series here on the business owner breakthrough. I'm looking forward to sharing it with you. In our next episode, we'll dig into the first key driver. As we mentioned earlier, it's all around financial performance and why it's the backbone of a value of a business. So until then, make it a great day.