St. Patrick’s Day is a day to celebrate all things green. And unless you want to get pinched for the lack of “green” in your business – you should do everything you can to protect and harvest your business value. Working with a CEPA credentialed Value Advisor on your team will help your business value grow and prepare you for a potential exit.
Transferability is Key
Growing and harvesting your business value is the key to getting the most value out of an exit. Before starting the exit planning process ask yourself the following questions:
- Is your business transferable?
- Is your talent transferable?
- Are your customer relationships transferable?
- Are your process and technology transferable?
- Can someone else learn them?
- Is your culture so deep that integrating your team into your buyer’s business would raise the bar, providing them the opportunity to perform like you do?
If you answered “No” to any of these questions, you are not ready for the most valuable exit. According to Sean Hutchinson, a Value Advisors with the CEPA credential, a lot of owners have not spent time thinking about these questions and the “why” behind their business goals and shortcomings. Without considering the reasoning behind every business decision and how it impacts value, you will miss out on profits during an exit.
According to Tom Bronson, a Value Advisor, most businesses fail to reach the finish line during the transition process. He states that only 17% of attempted transactions actually end successfully. As you know from Walking To Destiny, “No worthwhile strategy can be planned without taking into account the organization’s ability to execute it”.
Plan For Greener Pastures in Your Third Act
As an owner you might think that your business is worth $X million. But do you know what this value will provide you? Does this amount of money allow you to live comfortably after you exit the business? Value Advisor Corby Megorden says that the goal of an exit is not to maximize dollar value, the goal is to find what is the sufficient value to do what you want to do in your next act. According to Walking To Destiny, “…it is likely that 80 to 90% of your net worth is locked up in your business. Second, you need a system which is built to continuously focus your team on maximizing value. Third, the ability to unlock that value at some point in the future will make a significant difference to your lifestyle and, at exit, will fund your next act”.
The difference between the amount of money your business is worth based on a valuation and the amount of money you need to sustain an enjoyable third act is known as the Wealth Gap. To close the Wealth Gap you need to invest time and energy in growing value in your business long before you plan to exit. Linda Ruffenach views closing the gap as “What you need to do at the beginning to be better prepared down the road”. After a valuation to identify your baseline business value, your next priority is to protect that value by mitigating personal, financial, and business risks.
Don’t leave your business value up to luck this St. Patrick’s Day, get the most “green” out of your business with the help of a Value Advisor!
Do you want to learn more about Value Advisors and the work they do to grow value in businesses? Stay tuned for the release of our White Paper, “A Look Inside the Unique World of Value Creation” soon.