Once upon a time, I was told that if I was going to be an entrepreneur, I had to make the most of my business.
Throughout the years, I feel as though I did that. I created, launched and scaled it up.
But what I later learned is that making the most of your business also includes properly preparing an exit plan. If you don’t properly prepare an exit plan, you run the risk of undoing all your hard work by a) selling your business to someone unsuitable who isn’t going to treat it as well as you did and b) selling it for way less than it’s worth.
And b) is a real killer. You’ve worked tirelessly on your business over the years, you’ve sweated blood, you’ve had sleepless nights over it, you’ve cried actual tears, you’ve celebrated huge wins … and yet here you are, with nothing to show for it because you didn’t prepare a business exit.
It’s just horrible. It’s painful. I’ve seen people in that exact same situation. They decided to sell their business because they needed funds for their next venture, and yet they only got a fraction of what they wanted to get for it. They sold themselves short. They weren’t able to attack their next venture with the capital required. It sucked.
I don’t want this to happen to more people, which is why I’ve written this article. In this guide, I’m going to show you exactly how to reverse engineer a business exit so that you can learn not from the people who have sold themselves short when selling their business, but from those who have thoroughly planned their exit strategy from start to finish so that they get what they deserve for it.
Here’s the thing: You can’t plan an exit strategy unless you’ve planned to sell first.
Does that make sense?
Selling any business shouldn’t be something that suddenly pops into your head one day. You can’t be sitting at the dinner table with your wife when you say, “pass the salt, please! Oh, by the way, I’ve literally just decided to sell my business this week. How about that?!”
It will catch your wife off guard – and that’s hardly surprising. Because she knows that impulsively deciding to sell your business straight away is the wrong way to go about this.
How come you ask, while sprinkling salt over your steak.
Well, I’ll tell you. An Amazon business needs to be primed for sale so that you extract as much value from it as possible.
Here’s one example. Let’s say your Amazon business is just one year old. Less than that even. It’s eleven months old. If you suddenly decide you’re gonna sell it this week, your wife has every right to sleep in the spare room and lock the door so you can’t come at her with more crazy ideas.
It’s crazy because your business is too young to prove sustainable and consistent revenue, as well as signs of future growth. It isn’t saleable just yet.
On the other hand, if your business is a few years old and has already been posting consistent profits that point to a very bright future, it can be sold soon.
However, there’s still a catch. And the catch is that exit planning is super important because this is what boosts the value of your business so that you make as much profit as possible.
In other words, it is what makes creating and working on a business worth it in the first place.
Let’s look at this a bit more in-depth.
If you’re like the impatient husband who we met earlier, you’ll want to sell your business as soon as possible.
“I just wanna be shut of it.”
But you’re not like the impatient husband. You don’t want to just get “shut of it.” You care about your business, and you care about maximising its value so that you take home as much money as you can get for it.
Naturally, exit planning sounds like a real pain. I’ll admit that. It’s hardly as exciting as creating and launching our business. It doesn’t give us that same shot of adrenaline. But it has to be done. It’s important.
The main reason having an exit strategy is important is because it allows you to focus on the long-term sustainability of your business. Rather than focusing on the here and now and getting out quickly, you’re instead looking at what it’s going to look like in, say, twelve months’ time.
In other words, you’re priming it for a solid future so that a potential buyer can come along, take a look at it, realise how sound its future looks, and thus offer you a very good deal for it.
On the other hand, if you don’t create an exit strategy, the long term sustainability of your business will look a lot more unstable. As such, any prospective buyer is going to come along, take a look at it and think, “hmmm, this business looks a bit shaky.” If they’ll offer you anything for it, it certainly won’t be what you wanted.
When you plan for the inevitable end, we focus on improving our business systems and getting it into shape so that, when the next person takes it over, they don’t have to do much of anything except keep the well oiled machine ticking over. And because a prospective buyer isn’t looking for a full time job here, manning an already well oiled machine is precisely what they want.
An exit strategy, then, allows you time to make improvements and adjustments to your business so that its value goes up. It gives you the chance to sort out contracts, automate tasks and – where viable – diversify operations, all so that your business looks more attractive to buyers.
If you’re going to reverse engineer a business exit, you need a plan. I’m going to break that plan down into three steps in this section.
In fact, forget that you’re an entrepreneur for the moment. As it stands at this precise moment, you’re not an entrepreneur. You are an “exit-preneur.”
If you’ve still got your entrepreneur shirt on at this stage, you will be:
Let’s take a look at the difference between being an entrepreneur right now, and an exit-minded business person.
Entrepreneurs know how to run their business. This is a fact. They’ve got the experience and know-how needed to create, launch and scale a business.
But leaving a business is very different. It doesn’t require an entrepreneur mindset – it requires an exit-planning mindset.
They’re two different things. Over the years, I’ve met some remarkable entrepreneurs who are very good at building businesses. Amazing. But they’re also terrible at selling their business. When it comes to exit planning, they have no idea what they’re doing. It’s a new, scary challenge that they weren’t prepared for.
As a result, they don’t get the profit all their hard work deserved.
On the flip side are entrepreneurs who also know how to exit a business. This is a major strength – they know how to run a business and exit one.
Can you imagine how powerful that is?
What makes it so powerful is that, from the very moment they’ve launched the business, the entrepreneur is already running it in such a way that they’re planning for their exit. This allows them to create a sustainable business that will a) succeed in the long term, b) be attractive to potential buyers, and b) will be hugely valuable in a few years time when it comes to selling.
At this point, you can surely see that it helps to be planning for your exit the moment you launch your business. And, of course, you’re way beyond that. So what’s the best you can do? Start planning for your exit now – but don’t plan to exit for at least a few months or even a year.
Becoming an entrepreneur who’s also an “exit-preneur” is, fortunately, not that difficult. It’s mainly about mindset. It involves you:
Whenever you’ve had to take a trip in the car to somewhere you’ve never been before, you’ve always made a plan to help you get there, right?
You used a map, you’ve added details such as stop-offs, and you’ve planned it all down to the last detail so that you don’t get lost and manage to make it to your appointment on time.
When it comes to reverse engineering a business exit, I cannot overstate the importance of knowing where you want to be before you sell your business. You need to a) plan where you want to be and b) create the steps that will allow you to get there.
How do you reverse engineer this?
You start with where you want to be in terms of profit. Then, you create the path backwards to where you are now, as this will allow you to see where you need to go to get to your profit.
Does that make sense?
It’s like when a writer is drafting their story. They will often start with the ending so that they know exactly what needs to happen in their story for the ending to happen. They know what changes the characters need to face, and they know what the story needs to look like at the beginning.
Simply by knowing how this is gonna end, you can plot a strategy that will allow you to get there, just as a writer is able to put together a plot that allows them to create their ending. Unless they know what their ending is going to be, they will be left floundering in the dark, attempting to create some sort of plot. It just doesn’t work like that.
Look at it like this. Let’s refer back to our inpatient businessman and husband who we met earlier. Before he started his business, he said to his wife “I wanna sell my business for £2,500,000!”
She looks pretty startled.
“Wow, that’s a lot of money, honey! But how are you going to get that kind of money for it?”
That kind of money won’t be there when it comes time to sell his business unless he puts in place a series of steps that get him from initial launch to the £2,500,000 sale. He has to understand the mechanisms and systems that need to be put in place so that his business is actually valuable when it comes time to sell.
Otherwise, he’ll be shooting in the dark.
You can also look at it this way. Let’s say you set a goal, any goal. It could be that you want to lose X amount of weight in 4 weeks. The only way to reach this specific goal – or to at least get near it – is by putting in place a series of smaller goals that tie into your bigger goal and put you on the right path.
If our impatient husband wasn’t specific about how much he wanted his business to be worth, he could easily end up selling it for way below £2,500,000. And that’s because he hadn’t planned ahead. He hadn’t created the goals that would make this a £2,500,000 business.
A final point to make is that you must be realistic about your business exit. Don’t aim for the stars if you can’t even get past the clouds. Because, while it’s easy to focus just on the money (and, sure, £2,500,000 sounds pretty damn good), a good exit strategy isn’t just about the money. It’s about a plan that works for you and your business.
The problem is that a lot of entrepreneurs are very good at creating and launching a new business that they’re super excited about … but less good at actually taking it onto the next level. They don’t allow the business to grow in the right way, they don’t embrace new ideas, they don’t automate and so on.
To illustrate my point, let’s consider a business owner whose business had real growth potential. And yet, it didn’t grow. It didn’t achieve its potential, and therefore his exit was weak.
Why did this happen?
It didn’t happen because of the nature of his business. His business was rock solid.
It happened because of him. He failed to embrace new ideas and hire talented people who would have taken his business to the next level.
There’s also a point to be made here about selling at the right time. Let’s consider a business owner who has done all she can for her business. She created it, launched it, scaled it – but she’s now plateaued because her personal life has taken over. She’s started a family with her partner, they’ve moved into a new house, things are happening away from her business … and her business has nosedived somewhat.
The right thing to do in this situation is to be realistic and admit that now is the right time to prepare an exit plan. If she doesn’t do that, the value of her business will continue to plummet and she will be left with a pittance at the end of it all. That’s not the right way to go about things.
I hope that now we’ve reached the end of this article, you’ve learned what it takes to exit a business. It doesn’t take an entrepreneur to exit a business the right way – it takes an exit-based mindset.
If you’re thinking that now is the right time to sell your business, now is also the right time to start conceiving a business strategy that will allow you to sell your business at some point in the future. Not right now.
So go ahead – read our tips on how to maximize your business value so that you make as much profit as possible. Make this a part of your exit game plan so that all those years of working hard on your business are actually worth it.
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