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Timestamps:
00:00 Introduction
01:04 What’s exit planning to you?
01:55 Redefining Exit Planning
02:17 10 Exit Planning Paradigm Shifts
02:39 Shift 1 – Business is Personal
03:30 Shift 2 – Value is the Long-term Goal, Not Income
04:11 Shift 3 – Focus on the Present, Not the Future
05:03 Shift 4 – Manage Your 5 Stages of Value Creation
06:15 Shift 5 – Your Intangible Assets Must Be Transferable, Not Your Tangible Assets
06:52 Shift 6 – Don’t Just Start Projects, Adopt a Process
07:29 Shift 7 – You Must Execute
08:05 Value Acceleration Methodology
08:16 Shift 8 – Measure Your Results
09:10 Shift 9 – It’s Not About You, It’s About Your Team
10:04 Shift 10 – You Have to Invest in Your Success
11:00 Recap
The Importance of Building a Business for Value Creation
Focusing on building a business with the characteristics that drive value is essential. Not only does this approach improve your income and cash flow, but it also provides more opportunities to exit your business on your own terms when you’re ready. After my previous video, many people reached out, asking for more details about the three parts of an exit plan.
In the last video, I mentioned these three essential parts: business goals, financial goals, and personal goals. Today, I want to focus on the business side of things and how conventional thinking about exit planning might be holding you back.
If you’re ready to challenge your perspectives on exit planning, let’s dive in.
Rethinking Business Growth and Exit Planning
Let me start by asking you a simple question: When you think about growing your business, what comes to mind?
Take a moment to jot down your thoughts. Maybe you think about marketing, hiring a new sales team, entering a new market, or even acquiring another business. These are all great strategies. However, how many of you thought about exit planning as a way to grow your business? My guess is, not many.
This is where most business owners go wrong. They see exit planning as something for the future, a task to tackle when they’re ready to leave. But here’s the truth: Exit planning is just good business strategy. The best time to plan is now, when you’re not ready to exit. Planning early positions your business for success today and makes it much easier to exit on your own terms when the time comes.
The 10 Paradigm Shifts for Successful Exit Planning
In his book, Walking to Destiny, Chris Snyder talks about ten paradigm shifts that need to happen for a successful exit. Today, I want to walk you through these ten shifts to give you a deeper understanding of how exit planning should be approached.
1. Business Is Personal
Your business should not dictate your lifestyle. Instead, your personal goals should drive your business. The business exists to serve you, not the other way around. Many business owners feel that they’re trapped in their business, thinking it’s impossible to balance personal life with running a company. The reality is, once you recognize that your business should support your personal goals, it becomes easier to find that balance.
2. Value Is the Long-Term Goal, Not Income
Many business owners focus on income because it’s essential for running the business. However, focusing solely on income can prevent you from building the value of your business. When it comes time to exit, there may not be enough value to attract buyers. Instead, prioritize growing the value of your business—cash flow and income will naturally follow.
3. Focus on the Present, Not the Future
It might sound counterintuitive, but you need to focus on what you’re doing today to grow your business. Too often, exit planning publications focus on the endgame—who you’ll sell to and how. Instead, the focus should be on the characteristics that build value in the business now. These will give you more options when you’re ready to exit.
4. Manage the Five Stages of Value Creation
Value creation doesn’t just happen. It’s a process, and there are five key stages you must manage: identify, protect, grow, harvest, and manage. First, identify what makes your business valuable. Then, protect those assets—whether through contracts, insurance, or other means. Next, focus on growing that value. Once you’re ready to exit, you can harvest the value you’ve built, and finally, manage that value to ensure it continues to grow.
5. Your Intangible Assets Must Be Transferable
When you think about selling your business, it’s easy to focus on tangible assets—things like equipment, property, or inventory. However, it’s your intangible assets—the things that can’t be easily seen or touched—that truly make your business valuable to a buyer. These include customer relationships, brand reputation, or intellectual property. If these aren’t transferable, your business won’t be attractive to potential buyers.
6. Don’t Just Start Projects—Create a Process
Many business owners dive into projects without taking the time to establish a process. While taking action is important, a clear process ensures that you stay organized, know what to focus on, and can maximize growth. When you’re building value in your company, having a process helps you do things in the right order and increases the likelihood of success.
7. You Must Execute
Having a plan is great, but it means nothing unless you execute it. Many experts can give you advice on what you should do, but often, the “how” is missing. This is where execution becomes essential. The Exit Planning Institute introduces a concept called the Value Acceleration Methodology, which serves as a step-by-step guide to help you execute your plans. Without execution, even the best strategy will fall short.
8. Measure Your Results
To truly understand the value of your business, you need to measure your results. This isn’t just about knowing the tax value of your business. It’s about understanding what your business is worth to a potential buyer. Knowing this helps you track your progress as you work on growing the business. When you start the exit planning process, one of the first steps is to get a clear understanding of your business’s current value. This will allow you to measure your growth and make informed decisions.
9. It’s Not About You—It’s About Your Team
Many business owners fear that if they tell their team about their exit plans, the team will lose commitment. However, your employees are likely already wondering what will happen to the business if you’re no longer there. Having a plan in place provides security for your team and ensures continuity when you exit. It’s crucial to ensure that your team is ready and capable of maintaining the business for the next owner.
10. Invest in Your Success
Running a business requires investment in equipment, services, software, and other tangible assets, but don’t forget to invest in your business’s intangible aspects as well. You need to spend money to grow your business, especially in areas that are harder to quantify, like improving processes or investing in training for your team. The Value Acceleration Methodology gives you a system to monitor your progress, making it easier to justify the investments you’re making in your business.
Conclusion: Start Your Exit Plan Today
We’ve covered a lot today—ten paradigm shifts that need to happen to set you up for a successful exit. Remember, exit planning isn’t just about the distant future; it’s something you should be working on today. By focusing on building value, executing your plan, and ensuring your team is prepared, you’ll not only set yourself up for a smooth exit but also enjoy the rewards of good business strategy now.
If you have any questions or need help developing your exit plan, feel free to reach out for a strategy call. I’m always happy to assist!