10 Benefits of Having an Exit Plan
Benefit #2 – Have Better Systems in Place
A big part of the sales process is about reducing the risk in the mind of the buyer. The perceived value of your business may be more affected by potential risk than you realise.
If you are planning on selling your business to a first time operator then business systemisation as part of your exit plan is crucial. When selling to an experienced operator or strategic buyer then a well systemised business will help you to drive the value higher than these buyers will typically consider.
With a first time operator there is generally a lot of concern about whether or not they will be able to run the business. You may not see this at the start of the sales process but trust me, it kicks in at some point. Plenty of buyers get cold feet once the emotional feelings are replaced by logic and fear.
Working on putting strong systems in place is going to help you overcome this objection, ideally even before it becomes one. Having demonstrated systems in place is also going to help you to convince your landlord that the business can and will run without you.
I am sure you have seen posts in the group about landlords refusing assignments and deals falling over just when you think its all done. This happens a lot with first time operators, you need to prepare the business and the application for assignment thoroughly.
Exiting your business involves more than selling the fixtures, fittings and goodwill to your buyer, you also need to sell your buyer and their plans to your landlord. If the buyer has less experience than you then the landlord can legally (and often will) refuse to assign the lease.
By including details about the business systems in the application to assign the lease you are reducing the potential risk in the mind of the landlord (or agent).
Think about it commercially, this is a deal and deals need to work for both sides. Look at it from the landlord’s perspective, put yourself in their shoes and ask yourself what potential risks you would see if presented with your buyer as a tenant?
Demonstrating that the business is systemised and running with limited input from yourself is a big advantage. Presenting this alongside information about how the business handover, the training process in addition to the standard information required will significantly improve your chance of getting a positive response.
Strategic or experienced buyers generally don’t want to pay premium prices, the fact that they have the confidence and experience means that unless you have a stand out business they may not see the value.
In most cases these buyers are not looking to work in the business themselves, they will either want a bargain or something under management or at least well systemised, which one of these is your business?
If you present a buyer like this with a well prepared business opportunity then although they may try to drive the price down they will be able to see the value. Ultimately the value is going to be determined largely by the market. If you are able to confidently generate interest from multiple buyers then this will help you to push the price up with experienced and strategic buyers.
By having your business fully systemised and thoroughly prepared for sale you are going to be able to control the pace of the sale right from the start. Not feeling rushed will help you to negotiate in a more confident manner and you will sell on your terms.
In the short term this is also going to make your transition out of the business a lot smoother. The time that you will free up will help you to think clearly about your next move, something that is almost impossible to do properly when you are flat out.
If you don’t currently have any systems in place then don’t worry, you are not alone! In this position its easy feel overwhelmed at the thought of setting this up but I have found just trying to do something on this each week can make a huge difference.
I try to encourage the people I work with to set aside a small amount of time each week to push this forward. Broken down into small chunks this is much easier, it does not have to all be done at once and you will be amazed at how much better you feel just to be taking some action on this.
Simple documented procedures can make a big difference to staff as well as to you. Take onboarding new staff members as an example. How much easier would it be for you and for them if there was a system in place with checklists and guidance about different aspects of their new role?
I have always maintained that one of the biggest success factors in hospitality is being consistent. Do you have a system in place to clearly communicate how tasks should be carried out? Are all of your team doing the same thing? Do you team know what you expect of them?
There are very few areas of your business that can’t be systemised, which one causes you the most dramas? Think about how you can gradually systemise one area at a time and don’t fall into the trap of thinking that you have to do everything. Believe me, once you get this moving in the right direction the momentum will really build and the results can be literally life changing.
If you have never tried this then I hope this inspires you to at least give it a go. For a small investment of your time (and little or no cost) you can make a big impact not only in the value and saleability of your business but also to your own working and personal life.
As always feel free to post any questions, experiences or suggestions in the comments below.
Good luck and let me know how you get on.