90% of Businesses are Unsellable*1 and therefore virtually Valueless.
With many business owners having 80 to 90 percent of their financial assets based in their business*2, the idea of selling to retire is a myth because their business has not been made saleable.
To ensure your business is saleable and for its maximum value, you must shift from Profit to Value and then Analyse, De-risk, Enhance, and Realise that value.
This highly structured step by step Value Enhancement process is called Exitology ™. Maximise your Ultimate PayDay™ and enjoy your retirement.
Exitology ™ adresses the 7 simple and immutable realities of business transition.
THE SEVEN SIMPLE REALITIES
All business owners exit their business because they are human.
All businesses have at least some value that can be sold or transferred to someone else.
Preparing for exit significantly increases the value that could be realised.
Preparing for exit significantly increases the probability of a successful exit.
A businesses built for exit [and therefore maximum value] are better run, more profitable and less stressful.
Planning for exit includes planning your personal finances and 'life-after' plan, which results in improved personal wealth and happiness.
The value of a business can, in some cases, be well over 80% of the business owner's personal wealth.
Peter Hickey/MAUS ValueMax® Workbook - MAUS Business Systems.
Only businesses with the most BUYER APPEAL get sold!
You'd never attempt to sell a house without making it look as attractive as possible. Both inside and out every aspect of the house must look it's best to maximise the sale price. Owners will stage a house and have a garden makeover in an effort to achieve the best possible price.
So with 90% of businesses not selling, why would you ever consider trying to sell your business without making it as appealing as possible to potential buyers?
TAKE THIS QUICK 7-minute quiz to get a snapshot of your businesses buyer appeal. This report will highlight your businesses strengths and weaknesses to help you to focus on adding REAL VALUE. Buyer Appeal is a key outcome from the Exitology ™ process.
Both the score and the report we provide are FREE of charge and are completely confidential. The results are based on research across hundreds of businesses from around the world and what adds REAL VALUE to your company.
You will have heard the three most important factors of Location, Location, Location when selling realestate. When we talk about business sales the three most important factors are Value, Value, Value.The drivers of Value are Profit, Timing and Risk.
Profit is a driver of Value
Profit refers to recast EBITDA not the Net Profit that your accountant calculates for income tax purposes.
EBITDA is Earnings Before Interest, Tax, Depreciation, and Amortisation.
Recast is a term used when all expenses incurred by the owners of the business and one off abnormal items are added back to EBITDA.
Timing is a driver of Value
Market Timing refers to factors such as the strength of the economy, availability of finance and capital gains tax.
Business Life Cycle Timing refers to factors such as growth stage, historical trends and future prospects.
Personal Timing refers to factors such as owner's energy level, owner's age, owner's personal involvement, owner's passion about the business and owner's health.
Risk is a driver of Value
Risk refers to the relative risk that a buyer feels if he were to invest in your company.
The higher the risk the lower the valuation.
The lower the risk the higher the valuation.
Risk is derived from three indexes:
Business Attractiveness refers to the relative attractiveness of your business to a buyer.
Business Readiness refers to the readiness level of your systems and documentation to be opened to scrutiny by a potential buyer.
Personal Readiness refers to the readiness level of the owners i.e. planned or forced exit.
Exitology ™ focuses on Buyer Appeal + Readiness = Reduced Risk and Higher Value
What Gives A Business More Buyer Appeal?
A strong management team that will transfer with the tranisition or purchase of the business.
Less reliance on the owner for the business to function efficiently.
A high degree of customer loyality and retention that will transfer with the tranisition or purchase of the business.
Well documented systems and proceses that drive the business and technology that will transfer with the tranisition or purchase of the business.
A high performance culture.
Strategic fit with an industry strategic buyer.
A product or service that is unique and protected by trade marks or patents.
What constitutes Business Readiness?
Profit & Loss, Balance sheet and Tax returns for the last three years.
Copies of all Sales, Supplier and Employment contracts.
Full Company history including details of all shareholders.
Full disclosure of all liabilities.
A breakdown of the assets.
A thorough understanding of the exit options.
An understanding of the value of the business.
And many more different items that are needed to sell a business.
How Are Businesses Valued?
The common ways a business is valued are as follows:
CFME - Capitalisation of Future Maintainable Earnings (recast EBITDA multiplied by a Multiple)
DCF - Discounted Cash Flow
NTA - Net Tangible Assets
Others - Return on Investment (ROI), Industry Method, and Cost to Create.
We focus on CFME as it is the simplest method to understand and is the most common method used for valuing small businesses. The two components are 1) Recast EBITDA and 2) the Multiple. The good news is that you can definitely control and improve EBITDA and to a certain extent you can control the multiple applied. The multiple tends to be a range of say 2-4 so you can work on your business to move it from a multiple of 2 to a 3 or a 4. So let's have a deeper dive by way of an example.
Company A had no exit plan and decided to sell only 6 months before wanting to retire and had too little time to present the business in it's best light. It had a recast EBITDA of $100k and a multiple of 2 (the industry range was 2-4). Company B had decided 2 years before retirement to plan for the sale of the business. By working with a Certified Exit Planning Advisor (CEPA) they increased their recast EBITDA from $100k to $120k and worked on their attractiveness so that they had a multiple of 3. Company C has been running his business for over 5 years with the end in mind and put a comprhensive plan in place with the help of a Certified Exit Planning Advisor (CEPA) so his recast EBITDA is $130k and his multiple is 4.
Company A Value - $100,000 x 2 = $200,000 Company B Value - $120,000 x 3 = $360,000 Company C Value - $130,000 x 4 = $520,000
I am confident that 100% of business owners would choose the Company C result.
The difference between the $200,000 and the $520,000 in the above example is called the VALUE GAP and this is what you could leave on the table if you have no Exit Plan.
The Value Gap example above is the basis of the methodology referred to as Value Acceleration™. Not just a methodology - a solution that delivers outcomes.
So What Does An Acredited Exitology ™ Practitioner Do to Deliver Successfull Outcomes?
As an Exitology ™ practitioner as well as 35 years experience owning and exiting a number of small businesses I have an MBA, a Diploma of Accounting and am a Certifed Exit Planning Advisor (CEPA). An Exitologist ™ can also be referred to as a Value Advisor. The Value Advisor takes the business owner through the Value Acceleration Methodology™. They oversee the development and implementation of the business owners Master Plan and act as the ‘quarterback’ or project manager of the advisory team, bringing in fellow professional advisors throughout the process as required.
Through this interactive, team-play process the Value Advisor helps the other advisors to become more engaged and resolve issues. The Value Advisor not only becomes a critical advisor for the business owner, but also a major referral source for other various professional advisors as they identify many different service opportunities throughout the process to address the business owner’s needs.
As a Certified Exit Planning Advisor (CEPA) I follow the Exit Planning Institutes' (EPIs') Value Acceleration Methodology™. Quoting directly from the EPIs' website (http://www.exit-planning-institute.org/about/value-acceleration-methodology/):
The Methodology creates a Master Plan for the business owner which integrates business, personal, and financial goals into their exit strategy. This process consists of three major components, referred to as the “three legs of the stool”: 1) Maximizing (sic) Business Value 2) Personal Financial Planning, and 3) Life After Business Planning. The process teaches that exit strategy is business strategy. It is about building, harvesting, and preserving family wealth for generations to come; and integrating best-in-class business practices into daily operations. The Methodology focuses on enterprise value.
CLICK HERE for more information about the Value Acceleration process.
My Offer to You:
I am writing a book about Exitology ™ and I need data from Baby Boomer Business Owners. If you are a Baby Boomer and own a business turning over between $2M and $15M and employ between 5 and 25 employees you can assist me. In return if you allow me to use your data I will conduct a Business Attractiveness Makeover worth $975.00 and provide a one hour apraisal of the results for FREE.
Feel free to call 0419 002 742 today for an obligation free chat with our Acredited Exitologist ™ Jonathan Lucas.
Nothing to lose ..... everything to gain.
*1 International Business Brokers Association 2017