The headlines about the Texas freeze and energy disaster caught my attention. I read two long articles, one in the Seattle Times and the other in the Wall Street Journal. Both had the same conclusion; Texas took the easy way out (again) and paid for it.
The bottom line is Texas officials had been warned many times over the last 30 years about their energy infrastructure not being winterproof. They ignored the advice because deep freezes rarely happen in Texas and by ignoring it they kept their electricity rates the lowest in the country. But enough about those details, let’s discuss how too many businesses are like Texas electricity and wishful thinking.
A lot of business owners are like Texas and ignore the planning part of exiting their business. They flip the switch and say they want to sell. Like the Texas utilities, there’s no preparation for the actual event. So here are some thoughts on the subject.
Mr. or Ms. business owner, your company is not the greatest thing ever. There are a lot of other businesses out there, all wanting the best buyer possible to buy them. I mean, who wants to sell to someone who won’t be successful. That means you have to look at your business like a buyer will look at it. Better yet, get an independent set of eyes to look at it. Perform a mock due diligence (self-promotion here: as in our book If They Can Sell Pet Rocks Why Can’t You Sell Your Business (For What You Want?). Have a banker who does buy-sell loans look at it also, because they’re the ones who will provide the money.
Once you’ve done this 30,000-foot overview it’s time to put a plan in place so you can exit with style, grace, and more money.
Don’t try to do everything at once. There’s a reason experts say start this three to five years in advance. Things take time. And three to five years allows you to show the results on your financial statements.
Have a list of tactics, whether it’s for growth, margin improvement, expense reduction, process improvement, an improved culture, or something else. Know what you are going to do.
Get into the details.
Implement the darn thing. Don’t have it be a shelf plan, make it an action plan (see my blog for my ACTION™ plan to sell a business).
Get your team involved. Everybody wants to do better and they don’t have to know it’s exit planning. They’ll think it’s a growth strategy at work.
Cover the basics first, and as I’ve written many times, the basics include:
- Solid financial systems and accurate financial statements. Don’t emphasize minimizing taxes. Show profit because banks and buyers like profits. Don’t blend your personal and business checkbooks.
- Grow. Prove you can do it versus saying how it can grow in the future.
- Shed your ego. Get to the point you do as little as possible with the day-to-day operations. Concentrate on strategy and vision.
- Hire and be able to retain great people. Buyers are buying your people as much as anything else.
- Like searching for customers, you have to keep doing the things you’re supposed to do. Do so and good things will happen.
Don’t be like the Texas utilities and ignore all the preparation until it’s time to exit. Because “things” happen, as per the example below.
Lesson: A client lost a deal to sell his company (for more than it was really worth). He wasn’t prepared to provide the buyer what the buyer needed, which was the usual and customary information. While regrouping, the company got hit by a cyberattack, closed operations for days, lost customers, and now his business might not be worth much of anything. And he’s got a handful of leases on which he’s obligated (in a tough office real estate market).
Tip: He thinks the cyberattack was like what happened with Solarwinds, via a third party. His attackers got in through his previous managed service provider that had not deleted access to his system. Do disaster planning on anything that can interrupt your operations, and cyber is on the top of the list, way ahead of any natural disaster.