July 11th, 2011

Today I wanted to talk with you about the concept of “the business owner endgame.”

Building a business is a lot like chess. You have your opening moves (in business this is your start up or Level One stage), your middle game where you develop the board (the Level Two stage of building out a solid business that works well) and the endgame (the time you execute on your desired exit strategy, usually at least 24-36 months in ADVANCE of pulling the trigger.)

Lesson One: The earlier you plan for your eventual endgame, the easier it is to do it well.

There are four main exit strategies for business owners: sell… scale… own passively… or pass the business on to your heirs as part of your legacy.

Most business owners never think ahead to the day they want to execute on one of these strategies and as a result they make it so much harder on themselves to do it successfully.

If you only look at how can run your business, just doing the job of the business as a means to generate active income to live off of, you’ll make short sighted decisions that will come back to haunt you.

Smart Level Three business owners know that by clarified their ultimate business outcome; they will grow their business smarter and faster. This leads to lesson two and three…

Lesson Two: No matter what your exit strategy, build your business so that you COULD sell it; it will help you build a better business to own passively or scale.

I’ve given this advice to thousands of business owners over the years and I’ll say the same thing to you: if you build a business that is more saleable, the things that you do that make it more saleable make the business easier to own passively or more able to be scaled successfully.

These include things like:

  • Decreasing the business’s dependence on you the owner
  • Having strong controls in place
  • Having a sales system that guarantees future growth and reliable income streams
  • Reducing any customer concentration issues
  • Etc.

Lesson Three: Look at your business through the eyes of a buyer TODAY, and you’ll see the essential steps for you develop a more valuable business.

Buyers care about things like do you have solid business systems in place? Do you have key branding or other protections from competitors in your market space? Do you have a solid and growing sales pipeline? Is the business independent of the owner or are all real decisions and actions based on the owner’s involvement? Etc.

You learn so much about your business when you go to sell, that’s why I suggest you don’t wait until you put your business up on the market to get this feedback. Give it to yourself by conducting your own “buyer’s audit” of your business.

Lesson Four: Most exit strategies require 24-36 months to pull off to best effect – plan today for your eventual exit.

Too many business owners make the million dollar mistake of waiting to prepare their business for their exit until the year in which they want to pull the trigger and execute their exit.

Instead, savvy business owners know that they need a minimum of 24-36 months to maximize the value for a sale… or to transition to a passive ownership role in an intelligent fashion.

Some things just can’t be rushed.

I hope these four specific tips really prompt you to think today about the tomorrow you are working so hard to create.