By Helen Butler, Simplified Operations
I’ve been having a lot of conversations recently with business owners who have an exit date in mind. Not a firm date. More of a rough plan.
“Maybe in five years.”
“I’d like to slow down in a few years.”
“The business is the pension.”
The ambition is there, but what often surprises me is how little thought has been given to what needs to happen between now and then to make that exit possible.
Whether the goal is a trade sale, management buyout, succession plan or simply stepping back from day-to-day operations, the preparation required is often far greater than people expect.
According to research from the Federation of Small Businesses, a significant proportion of UK business owners are over 50. Over the next decade, thousands of owner-managed businesses will need to change hands in one form or another. Yet many owners remain heavily involved in the day-to-day running of their businesses, creating a challenge that is often underestimated.
Building a business and building a saleable business are not the same thing
Most business owners naturally focus on growth. More customers, more turnover and more profit.
All of those things matter, but they are not necessarily what makes a business attractive to a future buyer, investor or successor.
A business may be profitable and growing, but if every important decision goes through the owner, key customer relationships sit with the owner and operational knowledge exists only in the owner’s head, the business becomes much harder to transition.
This is something I see regularly. In many cases, the owner has become the glue holding everything together. They’ve built the relationships, made the decisions and carry much of the knowledge. Often, that’s exactly why the business has been successful.
The challenge is that the same things that helped build the business can make it harder to step away from.
The five-year illusion
Five years sounds like a long time.
Until you start looking at what actually needs to change.
Developing leaders who can make decisions without the owner. Creating clear accountability. Building processes that create consistency. Improving visibility of performance. These things take time to embed and become part of how a business operates.
Most importantly, reducing owner dependency takes time. You cannot spend twenty years becoming the centre of everything and then expect to step away in six months.
Start earlier than you think
The businesses that are best prepared for an eventual exit are often not the biggest or fastest growing. They are the ones that have spent the time building capability around them and reducing reliance on the owner.
Interestingly, these are also the businesses that owners tend to enjoy running the most. They spend less time firefighting and more time focusing on growth, opportunities and the future.
Rather than only asking what your business might be worth in five years, ask yourself an additional question:
“If I stepped away from the business for three months next year, what would break?”
The answer will probably tell you exactly where your exit planning needs to begin.
Ultimately, good exit planning isn’t just about preparing for a transaction. It’s about creating options. The more resilient and independent the business becomes, the more choice you have about what comes next.
If you’re starting to think about what an eventual exit might look like for your business, get in touch – now is a good time to start the conversation.
helen@simplifiedoperations.co.uk