___ Concepts We Can Learn About _____ From How2Exit's Interview W/ Laurie Barkman - Watch Here
Here is what my team and I learned from this interview: (These are notes from team members, writers, sometimes AI, and even listeners who submitted what i learned loosely edited and shared here) - If it seems a bit unrefined, you're reading our notes, so. yeah. -Ron
Concept 1: Assess Business Value Early
As a business owner, it can be easy to get caught up in the day to day operations of running a business and forget to think about the future. However, it is important to assess the value of your business early on in order to ensure that you have a successful exit when the time comes.
This is something that Laurie Barkman, a business transition Sherpa with her firm Small.Big, knows all too well. As a former CEO of a company that was sold to a Fortune 50, she was part of the executive team and experienced the importance of having a sellable business. After that, she went into private equity and was on the other side of the table for doing deals. Through her experience, she learned about exit planning and the importance of assessing the value of a business early.
Transferability is the biggest challenge that business owners face when it comes to selling their business. A business owner may think that their business is ready to be sold in two to five years, but if they haven’t done the necessary assessments, they may not be ready. Barkman recalls a conversation she had with a business owner who was approached about a year ago but wasn’t ready and regrets it. He could have done things differently to help build the value if he had done the assessment five or seven years ago.
For business owners who have given up nights, weekends, and family time to their business, it can be a huge disappointment to realize that their business isn’t sellable. That’s why it’s important to assess the value of your business early on in order to ensure that you have a successful exit when the time comes. Doing this assessment can help you identify any gaps in your business and give you time to make the necessary changes. So if you’re thinking about selling your business, make sure you assess the value early on to increase your chances of success.
Concept 2: Innovate For Sustainability
When it comes to business succession, there are many different approaches that can be taken. One approach is to bring in an outside CEO to help transition the business to the next generation. This can be a great way to bridge the gap between the current and future generations, as the outside CEO can bring a fresh perspective and new ideas. Another approach is to have the next generation leader go through an education and experience process to learn the ins and outs of the business. This can be a great way to ensure that the next generation is well-suited to lead the business.
No matter which approach is taken, it’s important to have a good mentor program in place. This can help the next generation leader understand their role and the skills they need to be successful. Having a mentor can also help them understand the importance of innovation and sustainability.
Innovation and sustainability are key components of any successful business. By innovating, businesses can stay ahead of the competition and ensure that their products and services remain relevant. Similarly, sustainability is important for long-term success. Businesses need to be aware of their environmental impact and take steps to reduce their carbon footprint.
In order to innovate for sustainability, businesses need to think about the long-term effects of their decisions. This means looking at the environmental impact of their operations and taking steps to reduce their carbon footprint. It also means investing in renewable energy sources and green technologies. Additionally, businesses should be open to new ideas and embrace change. This can help them stay ahead of the competition and ensure that their products and services remain relevant.
In conclusion, when it comes to business succession, it’s important to assess the value of your business early on and have a good mentor program in place. Additionally, businesses need to think about the long-term effects of their decisions and innovate for sustainability. By doing this, businesses can stay ahead of the competition and ensure their products and services remain relevant.
Concept 3: Explore Different Options
It is also important to explore different options when transitioning a business from one generation to the next. One option is to have the business remain within the family, either through a direct transfer or through a trust. Another option is to have a CEO from outside the family run the business. This could be beneficial if the family does not have the necessary skills to run the business. Additionally, businesses might consider having a management team or a strategic buyer take over.
Finally, businesses might consider an Employee Stock Ownership Plan (ESOP). This could provide tax benefits and could be a good option for larger businesses.
Overall, when transitioning a business from one generation to the next, it is important to explore different options and understand the motivations of each option. This will help ensure the business remains successful and can remain relevant for years to come.
Concept 4: Business Must Be Transferable
One of the most important elements of transitioning a business is to make sure it is transferable. Transferability is the ability of a business to be transferred from one generation to the next without any major disruptions. This includes aspects such as the business’s ability to operate without the original owner, the ability to transfer assets, and the ability to transfer knowledge.
In order for a business to be transferable, the assets of the business must be tangible and transferable. This includes tangible assets such as machinery, equipment, and inventory, as well as intangible assets such as customer lists, brand identity, and SOPs. It is also important to consider how transferable these assets are. For example, if a business owner is the only one who knows how to operate the machinery, it is unlikely that the business will be transferable.
In addition to tangible assets, it is important for a business to have transferable knowledge. This includes knowledge of the business’s operations, processes, and customer relationships. Without this knowledge, it is difficult to transfer the business to a new owner. The business owner should document processes and create SOPs so that the new owner can understand the business’s operations.
Finally, it is important to consider the business’s value when transitioning. It is important to understand the current market value of the business and assess the risks and opportunities associated with the transition. This can help ensure that the business is worth what it is being sold for and that the new owner has the resources to make the business successful.
Overall, transferability is an important factor to consider when transitioning a business. By understanding the value of the business, assessing the risks and opportunities associated with the transition, and ensuring the assets and knowledge of the business are transferable, a business can remain successful for years to come.
Concept 5: Risk Decreases Price
When it comes to the value of a business, it is important to be realistic. Business owners often have an inflated sense of what the business is worth, and when the offers come in lower than expected, they can be disappointed. It is important to take the time to work through any challenges that may arise and to be honest about what the business is worth.
One of the main risks associated with transitioning a business is the team. If the team is loyal to the owner and the same age group, they may be looking to retire soon. This can create a problem as the team may not be able to carry the business forward. In addition, if the owner is so tied in that the business is at risk when they leave, this can also decrease the value of the business.
In order to mitigate these risks, it is important to create options. If the new owner is able to fill the gaps left by the owner, this can help protect the downside risk. It is also important to explore different scenarios with potential buyers and to understand what they are looking for. This can help to ensure that the best fit is found and that the value of the business is not decreased.
Overall, it is important to understand the risks associated with transitioning a business and to take the time to create options and explore different scenarios. By understanding the value of the business and ensuring the assets and knowledge are transferable, the business can remain successful for years to come.
Concept 6: Maximize Value For Sale
When it comes to maximizing value for sale, the first step is to understand the different multiples applied to the financials. This includes EBITDA, SDE, and top-line revenue. Additionally, it is important to consider ad-backs, one-time expenses, personal expenses, PPP and EIDL, and tax rebates. All of these should be taken into account when calculating the value of the business.
The next step is to look at the market comps and assess what could potentially increase the value of the business. This includes the size of the business, the profitability, the cleanliness of the books, the reliability of the numbers, the industry, the growth prospects, the recurring revenue, and the risk associated with any one vendor, customer, or employee.
By understanding the risks associated with transitioning a business and taking the time to create options and explore different scenarios, the business owner can maximize the value of the business for sale. Additionally, by looking at the market comps and assessing the different drivers of value, the business owner can ensure they receive the best possible return on their investment.
Concept 7: Know Customer Satisfaction Metrics
One of the most important factors in assessing the value of a business is customer satisfaction metrics. Customer satisfaction metrics measure how satisfied customers are with the product or service they receive from the business. These metrics can be used to assess the risk associated with transitioning a business and to identify potential areas of improvement.
When assessing customer satisfaction metrics, it is important to look at the customer’s overall experience with the business. This includes the quality of the product or service, the customer service experience, and the customer’s perception of the business. Additionally, it is important to look at customer retention and referral rates, as these are indicators of customer loyalty and satisfaction.
When evaluating customer satisfaction metrics, it is important to consider the customer’s overall experience with the business. This includes looking at customer feedback and reviews, as well as customer loyalty and retention rates. Additionally, it is important to assess the customer’s perception of the business and its products or services.
By understanding customer satisfaction metrics, the business owner can identify areas of improvement and ensure they are providing the best possible customer experience. Additionally, the business owner can use these metrics to assess the risk associated with transitioning the business and to ensure they receive the best possible return on their investment.
Concept 8: Maximize Value Of Exit
One of the most common myths associated with transitioning a business is that it is impossible to do so without the help of a professional. While it is true that the business owner may need the assistance of a professional to maximize the value of their exit, this does not mean that they cannot do it themselves. By taking the time to understand their business and the value it holds, business owners can identify areas for improvement and create a plan for transitioning the business.
An important factor to consider when transitioning a business is the amount of time the business owner has to dedicate to the process. If the business owner does not have the time to dedicate to the process, it is important to seek assistance from a professional. This is because a professional can help the business owner identify areas of improvement, develop a plan for transitioning the business, and ensure the business owner receives the best possible return on their investment.
Business owners should also be aware of the myths associated with certain professions or industries. For example, some people may believe that it is impossible to sell a business if it is a sole proprietorship. This is not true, as it is possible to transition a business regardless of its ownership structure.
Finally, business owners should understand that transitioning their business requires momentum. If the business has been declining over the past few years, it is unlikely that the business owner will receive the best possible return on their investment. Therefore, it is important to seek assistance from a professional to ensure the business is ready to transition and to maximize its value.
In conclusion, transitioning a business is a complex process and requires the assistance of a professional. By understanding customer satisfaction metrics and taking the time to identify areas for improvement, the business owner can ensure they receive the best possible return on their investment. Additionally, it is important to be aware of the myths associated with certain professions or industries and to ensure the business has momentum before transitioning. By following these tips, business owners can maximize the value of their exit.
Concept 9: Plan For Retirement Early
Planning for retirement early is an important step for business owners. Retirement can be a difficult transition, especially if the business is not well prepared. Business owners need to plan ahead to ensure that their business is in the best possible state when they retire.
The first step is to understand customer satisfaction metrics. Knowing the customer’s needs and preferences can help the business owner identify areas for improvement and make the necessary changes. It is also important to understand the myths associated with certain professions or industries. For example, many people think that the electrical industry is not sellable, but this is not true. With the right preparation, businesses in this industry can be successful.
Business owners should also take the time to ensure that the business has momentum before transitioning. This means that the business should be profitable and have a steady stream of customers. This will make the business more attractive to potential buyers and help maximize the return on the owner’s investment.
Finally, it is important to have a contingency plan in place in case the owner becomes ill or is unable to manage the business. This includes having a succession plan and ensuring that someone in the family has signing authority on important documents. This will ensure that the business is not left in limbo in the event of an unexpected event.
Planning for retirement early is an important step for business owners. Taking the time to understand customer satisfaction metrics and identify areas for improvement can help ensure that the business is in the best possible state when it is time to transition. Additionally, it is important to have a contingency plan in place and to understand the myths associated with certain professions or industries. By following these tips, business owners can maximize the return on their investment and ensure a successful transition.
Concept 10: Own A Business, Not Identity
However, it is also important to remember that a business is not an identity. It is easy for business owners to become so immersed in the business that they forget that they are not the business. This can lead to feelings of anxiety and fear when it is time to transition out of the business. It is important to remember that a business is a tool that can be used to achieve certain goals, but it is not the only way to define oneself.
When it comes to transitioning out of a business, having an open mind and taking action is key. It is important to recognize that it is not easy to leave something that has been a part of one's life for so long. It can be helpful to have a trusted advisor or performance coach to help work through the emotions and identity issues associated with transitioning out of a business. Additionally, it can be beneficial to focus on the relationships that have been built and the impact that the business has had on the community.
At the end of the day, it is important to remember that owning a business does not define one's identity. It is a tool that can be used to achieve certain goals, but it is not the only way to define oneself. By recognizing this and taking action, business owners can ensure a successful transition and maximize the return on their investment.
Concept 11: Work On Business Early
This is why it is so important to work on one's business early. By taking the time to assess the business's readiness for a transition and the owner's personal readiness for a change, business owners can begin to develop a plan for the future. This plan can include developing a recurring revenue model, aligning the management team, and creating a strategic exit plan.
By taking the time to work on their business early, business owners can ensure that all of the pieces are in place for a successful transition. This includes taking the time to assess the business's readiness for a transition and the owner's personal readiness for a change. Doing this will help to identify any potential issues that may need to be addressed before the transition is complete. Additionally, it will help to ensure that all of the oars are in the water and moving in the same direction.
Finally, it is important to remember that working on one's business early does not mean that the transition will be easy. It simply means that business owners will have the best chance of success. By taking the time to assess the business and the owner's readiness for a change, business owners can set themselves up for success. Additionally, they can use the tools available to them to create a strategic exit plan and ensure that all of the pieces are in place for a successful transition.
At the end of the day, it is important to remember that working on one's business early is essential for a successful transition. By taking the time to assess the business's readiness for a transition and the owner's personal readiness for a change, business owners can create a plan for the future that sets them up for success.
Concept 12: Call 918-641-4150
The Investors and Entrepreneurs Professional Mastermind (TIEPM) understands this and is here to help. TIEPM offers a unique combination of traditional peer-to-peer masterminds and accountability partnering. This allows business owners to have the support they need to set goals, take action, and get results.
If you are looking to scale your business, break through roadblocks, and achieve success faster than you thought possible, then TIEPM is the perfect resource for you. To learn more about the Investors and Entrepreneurs Professional Mastermind, call 918-641-4150.
When you call 918-641-4150, you can tell us about the show, ask questions, suggest a guest, or even tell us about a business you have for sale. We will reach back out to you and help you create a plan for the future.
The Investors and Entrepreneurs Professional Mastermind is here to help business owners create a successful transition and achieve success faster than they thought possible. So don't wait, call 918-641-4150 today and start planning for your future.
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