“Luck is not a business model.”
The journey to selling or transferring ownership of your business has some common and critical elements. No matter what method of transition you have, these are all encompassed in the S.E.L.L.I.T. model which has been developed and refined over 25 years of succession and exit planning – leading to millions of additional value being added to businesses.
For some business owners, the process may be shorter and simpler than others. Figuring out where you want to be is the first step toward getting there. Many business owners never think about the way they are going to leave their business even though there is a 100% certainty that they will leave one day – one way or another. As a business owner myself the exit plan was always in play, with contingency plans if anything unexpected happened to any of the key people in the business, including myself.
Having worked with or spoken to thousands of business owners over the last 3 decades, selling their business has been a consistent theme of conversation. Yet most are still in the dark as to the choices they have (selling isn’t the only way to extract value) or the actual process that they need to prepare to go through. Time to dispel the mystery and explore what really happens when you want to prepare to leave your business.
What is the S.E.L.L. I.T. model when you want to sell your business?
There are 6 key steps in the transfer of ownership of a business. Each one has its own challenges, plans and required actions. Each one also has different participants and requires specialist help.
Knowing who to get involved at each stage helps keep your team focused on the outcomes for each stage whilst still aiming at the global goal:
- Succession Planning
- Exit Planning
- Letting Go
- Legal requirements
- Information Memorandum (Sale Documentation)
- The Transaction
“There is no harm in hoping for the best as long as you have planned for the worst.”
In describing the model, it’s worth defining what each of the elements is before going into the detail of what each step requires in terms of actions. Clarity for you as the business owner means you’ll be able to get the appropriate help and as the right questions to get a full understanding of what happens, when and who needs to be involved.
Succession Planning is an essential part of any business’ strategic plan and their business continuity plan. Even if you are never going to sell your business, you will leave it one day, one way or another. So will everybody else in it. Having a succession plan is a key part of your business resilience and value. Succession planning is about the people, leadership and management of your business.
Exit Planning is about the ownership of the business. Whilst you might be tempted to think that the ownership structure of the business doesn’t affect your employees, suppliers or customers, this would be a misconception for many businesses. Often the business owner is the relationship owner of the commercial connections in a business.
If the business owner leaves, so do customers, staff and suppliers. Exit planning mitigates that outcome as well as how and when a business owner transfers ownership and control of the business. This includes planning for the unexpected.
Letting Go is all about the business owner. When you have founded a company, built it over a period and are emotionally attached to it, letting go can be a challenge.
Legals are the contracts and other legally binding documents that you’ll have to get on top of as you go through the sale process. Knowing what they include ahead of time means you’re prepared and understand how all the pieces fit in place. Knowing the process and documents saves you lots of time and money.
Information Memorandum is your invitation to potential buyers and is a taster of what your business offers them in terms of potential investment.
The Transaction is the final sale which consists of the final negotiations, the contract paperwork and the transfer of funds. This is the culmination of all your hard work and the final hurdle to get across.
Why S.E.L.L. I.T.?
Through each step in the process, your ideal outcome is addressed and checked in with. Often at the beginning of your journey you have an idea of what you expect from the future.
You have an idea of how much your business is worth. It may not have any basis in reality but it’s the number you’ve got in your head. Perhaps you have been thinking about what’s next in your life after work? I know many business-owners can’t imagine what they’ll do with themselves as their company has consumed their entire lives for so long. Others have hobbies, holidays and adventures planned with no specific date when they are going to do them.
Through the S.E.L.L.I.T. process you build up to achieving what you really want for yourself, your life and your business. There is enough flexibility built into the process for there to be changes to the road map at key points in time.
Transparency on what comes next and what is involved means you are in control of the process rather than feeling like you are on a roller-coaster. Most business-owners experience a lot of ups and downs when they go on the selling journey.
You’ll notice that the first two2 elements are planning, which might seem like a lot of planning. Getting out of your business is a BIG goal, not a flippant decision you make today and complete by the end of the week, especially if you are involved in the day-to-day management. Prepare for significant disruption to the flow of activity.
You can’t do it alone. You must involve others who may not currently be equipped to pick up the reigns straight away. Planning saves you time and money. It could be worth millions to you by the end of the process. Not planning WILL cost you thousands (possibly millions) and change the outcome you achieve, not for the better.
Planning gives you transparency on your business road map. It gives you clarity on who is involved and their role in the process. You can spend time engaging with the right people, taking care to engage with advisors that understand you and your business.
Often the exit process is defined, for the business-owner, by the feeling of being out of control.
Are you ready to sell your business? A Professional Business Mentor is just the leverage you need to get out of the rut and flying. Discover how you can make your business worth more AND avoid leaving money on the table when you finally leave your business. Click here to contact Christine by email alternatively you can book a call with the Business Mentor of the Year 2020, author and speaker. Who helps business founders get their businesses exit ready so they can enjoy a happier, richer future. She saves them THOUSANDS and increases the value of their businesses by MILLIONS.