What Is “Exiting?”
Exiting, essentially, means selling your business; that’s a given, right? But exiting your business correctly is actually a five step process, and it’s one where you really do need to be following each step in order to get the highest return possible.
Now, I’m not going to give you each step here today. I’m saving all five steps and their specifics for those of you who are going to join us for the next 10X Exit event. However, I can tell you a little bit more about why cash flow directly impacts your level of success as you navigate through the maturity of your business.
Wait. Why Do I Want To Exit My business?
Some of you might wonder, “Why would I even want to exit my business? Don’t I want to scale it to its highest potential?” The short answer is, yes, of course you want to scale your business to its highest potential. But the more complex answer? Well, it’s just that. It’s a little more complex.
You do want to scale your business to its highest potential, but you need to think strategically about why you’re doing that. You see, you should be working on your business in such a way that it’s able to operate successfully without you working in it at all.
So many business owners I’ve worked with over the years have been key-person dependent. To be key-person dependent means that if a key contributor is removed from the organization for whatever reason — health issues, family issues, finds a new job, and so on — then the organization ceases to operate at its highest level.
What If My Business Is a Family Business?
If your mindset is, “I don’t plan on ever exiting my business. This is a family business. I’m going to give it to my children,” that’s a wonderful and noble goal.
But here’s the thing: One way or another, you will exit the business.
So it really doesn’t matter if your plan is to create and maintain a family business, work until you retire, or sell your business in the next five, ten, or fifteen years. he fact of the matter is that you have to prepare the business for you to not be a part of it.
Similarly, in the case of a business that is key-person dependent,you need to be able to duplicate that person — by documenting their responsibilities, their process, and their innovations in the role — so that if for any reason that person is no longer in the role, that the business can still operate at its highest level.
Do You Have A Documented Process for Your Exit?
Documented procedures and processes (we use the VCEP format: Vision Commitment Execution Plan) financial transparency, updated employee handbooks, mission, vision, and values statements — these are all far from frivolous things. These structural supports give your organization value because they prove how strategically you’ve been leading the business!
One more thing about the idea of a family business: Is taking over your business their dream, or is it your dream? In my experience working with literally thousands of business owners in my career, nine times out of ten, the kids really don’t want to take over the family business.
Your situation might be different, but what I do know is that whomever is ultimately responsible for taking over your business in the future will be in a much better position (as will you if you’re selling) if you’ve operated,grown, and maintained the business as though you were always going to sell it.
How important is CASH FLOW to your exit strategy? It depends!
It really does depend on what kind of business that you’re selling. Many business sales are designed so that the owner is paid a multiple of his earnings. Hence,having increased cash flow will only mean a higher payout, right? Well, not necessarily.
Though it may surprise you, some buyers would prefer that you don’t have earnings. They’d actually prefer you have something else. Again, if you join us for our next 10X Exit event, I can tell you exactly what that is and how you can achieve it.
Remember: If you don’t have an exit strategy, you don’t have a business — you have a hobby. Join us for the 10X Exit event to learn from me, Grant Cardone, and other business giants about how you can position yourself for the best possible exit — a 10X Exit!