Rachel Vigers

Oct 37 min read

Exit Planning: Start your exit strategy now to Exit strong.

How business owners can achieve a strong exit & why planning your exit strategy pays off.

Sign referencing exit strategy & exit planning

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Business Sale vs Soul: are they mutually exclusive?

Some influencers in the world of business insist that building a business for exit means building it without heart & soul.

They go so far as to advise against exit strategy & planning at all – telling you to just “focus on building a business you love” &, by doing so, you’ll “end up with a business that others want to buy”.

We disagree.

Rock’s founder, Rachel Vigers believes that

“building a business you want to exit from at some point in the future is not mutually exclusive from building a business that you love, & that others love too, right now”

We don’t want to be depressing but...

Times change, life circumstances change.

Markets move & people move on.

No matter how much you love it, your business is bigger than you,

And, if you want to really leave a legacy with it,

it’s time to consider what it looks like without you in it.

Plan. Plan. Plan.

Why?

Because

to be able to exit strong one day, you need to first start strong, stay strong & grow strong - which involves taking an intentional & well-considered approach to defining your core foundations
the type of exit you want to have may indeed be influenced by the strength of specific foundations in the mix.

So, when it comes to achieving a strong exit, the sooner you understand what matters & get on with building it, the better.

Don’t believe us?

We spoke to one of our professional partners, Alex Dodghson from Uscita (pronounced Uh-Sheet-Ah) about all things exit…

Connect with Alex on LinkedIn

Who or what is "Uscita"?

Uscita are experienced exit strategy consultants, committed to providing reliable and honest guidance to entrepreneurs on how best to leave their business, including

What exit options are open to you
When exit can best be achieved
How to prepare for it
What likely value your business could bring on an open market sale (if that’s the route you take)

The name “Uscita” is from the Latin word for “Exit” (make sense now?).

Visit Uscita's website

We asked Alex how soon into starting a business should a business owner consider their exit strategy – and how Rock’s different foundational pillars (Direction, Connection, Impact & Value) intersect with supporting a strong exit.

Here’s how we got on...

Timing talks. Allow at least 5years.

When it comes to how soon a business owner should start thinking about their exit strategy, Alex was very clear

“The smart answer? The day you start your business.

The simple answer? As early as possible.

The most common answer? As much time as you can possibly allow”

Why is time such a big factor in exiting strong? Because, if you make changes to your business to improve how it is valued, those changes NEED TIME to a) take effect, & b) be reflected in your annual accounts over at least three years.

So, an overhaul of the management team, dramatic cost cutting exercise, pivoting of your product range, high profile marketing campaign or last minute sales drive still won’t support a strong exit – even if they result in increased profitability – unless you can evidence that the improvement is sustainable over time.

Alex advises 5 years to exit is a reasonable time frame to identify the changes you need to make, implement those changes, see the effect of them & then consistently evidence that effect over at least 3 years. Leaving it too late is a problem Uscita see all too frequently – don’t be that vendor.

What does a "strong exit" look like?

The way Alex sees it…

“When Rock talks about “exiting strong”, we immediately think of an engaged business owner who understands the vital connection between a business' daily operations and its future sellability.

When an athlete finishes a race, the time they clock is the result of the work which has gone before. Same for a business exit. The result at the finish line is the deal you agree to, but the work you put into your business in the years before is what enhanced its profitability, made it an acquisition target for buyers and increased its sale value.”

Basically, a strong exit is one that delivers exactly what the business owner wanted, needed & planned it to be.

How solid foundations can support a strong exit

The first of Rock’s foundations is DIRECTION – understanding the journey that the business has already been on, where it is now & where it wants to be. Direction is about defining a business’ ambition. Often, it’s during Direction discussions when the idea of a future Exit is first raised.

Just to be clear: talking about a potential exit at some loose point of time in the future doesn’t stop the business from setting bold goals to work on right now. Ambition is a complex & multi-layered concept. And, in truth, becoming the industry authority, household brand name, go-to provider or £Xm business, or indeed whatever other target you’re aiming for, may well be a way of supporting your future exit at the same time (clever, right?).

Also it’s important to understand the different types of exit & your desired time frame because the outcome of these discussions can directly influence the other foundational pillars.

For example, CONNECTION.

The second of Rock’s foundations, Connection is about identifying the source of emotional resonance between a business & its audiences. How the people that matter – customers, clients or staff – will feel about, identify with & bond with a business.

It’s obvious that Connection counts externally. Connected clients are loyal advocates – which typically brings higher levels of referrals, more repeat contracts, with more favourable terms (e.g. longer commitments, increased pricing) & higher recurring annual fee revenue – all of which can positively affect a business’ valuation.

But Connection counts internally too.

Alex points out that

“having connected staff would be a natural lead into a Management Buyout (MBO) which provides an entrepreneur with a defined exit route far ahead of time, one that can be well-planned for.”

She flags that funding can be a challenge with MBOs & can result in the purchase being staged over a number of years. But, the more emotionally invested that management team is with the business, the more committed & loyal they are &, in turn, the greater the reassurance to the vendor that the exit will succeed as planned & the business will continue to thrive in the meantime.

Even in an open market sale, where a buyer wants to buy a business (not a job for themselves!), that buyer is looking for a committed management team who will stick around & be able to step up once the founder is no longer part of the business. In fact, it’s the lack of this layer of connected structure that is one of the most common foundational cracks Alex sees, causing prospective sales to fail.

If an open market sale is your preferred exit route, then this is where the third of Rock’s foundations, IMPACT, also plays a part. Impact is about the difference you make – whether that’s in the world at large, in your specific market or in the lives of the employees, customers & clients. For exit planning, the impact a business has on its market in particular can be hugely influential.

According to Alex,

“Impact is key to an open market sale. If your company has impacted its market in such a way as to have a reputation that is second to none, buyers may start to approach you. Competitors may consider you a nuisance to their own business, winning contracts and taking clients from under their nose”

Impact sounds ideal - but comes with a caveat.

Unsolicited offers to buy your business don’t guarantee a sale will go through.

Alex warns that, at the point of offer, the prospective buyer will likely have access to some limited data at Companies House and very little else. As soon as you open yourself up to discussions on selling, you also open your business up to deeper inspection. If there are cracks in any of your other foundations, they might not stand by the offer you were hoping for. Price reductions and renegotiated payment terms are common responses to discovering all is not what it first seemed.

Finally, Rock’s fourth foundational pillar, VALUE (specifically, Differentiated Value) supports any type of exit strategy. A business that can demonstrably prove its source of sustainable competitive advantage immediately increases its buyer appeal.

So, essentially, all four core foundations – Direction, Connection, Impact & Value – can influence your chances of achieving a strong exit.

And, in the meantime, your foundations will play to different strengths depending on the stage & type of your business – mitigating risk, attracting talent, inspiring innovation, nurturing advocacy, driving growth, building longevity & supporting resilience.

This is what a strong business looks like.

This is what supports a strong exit.

Ask Rock about your Foundations strategy

Uscita's 5 Top Tips for Exiting Strong

Start early – allow at least 5 years of intentional exit planning.
Be prepared to step back. By far the most common problem Uscita experiences is founders who find it hard to step back & put in place a connected management structure that will allow others to take the reins.
Take off the rose tinted glasses: social media is awash with stories of founders who claim to have sold their SME businesses for multi-millions. If it was that easy or common, it wouldn’t be headline news. Selling a business is hard work & takes time & commitment.
Evidence. Evidence. Evidence. Due diligence is a painful necessity & can be incredibly complex & detailed. Build the management processes & systems into your business that allow you to store & retrieve the evidence needed during a due diligence process.
Seek independent advice: it’s difficult to see your own business without bias.

By building a business with strong foundations & taking these 5 steps for a strong exit, you can increase your sale price by up to 71% on average &, in the meantime, end up with a stronger business! Uscita & Rock are here to help.