Immediate Steps for Scaling and Preparing a Business for a Profitable Exit

I have spent over 20 years in the trenches specializing in buying, selling, fixing and growing businesses. When writing my first book in 2013, Sell Your Business for More Than Its Worth, I learned that 85-95% of all startups from 1-5 years are at great risk for going out of business, which is pretty common knowledge. However, when I wrote Exit Rich in 2019 and did the same research, I was flabbergasted at how drastically the business landscape had changed. Now, only 30% of startups will go out of business in the first 5 years. However, out of 27.6 million businesses, 70% will go out of business after being in business 10 years or longer.

You hear about the big box public companies, such as Kmart, JCPenney, Steinmart, etc. But what you don’t hear about are the small private businesses that are dropping like flies on every street, in every town, and in every state across our great nation. Many of these owners are baby boomers and are having to sell their business for pennies on the dollar, close their doors, or, even worse, file bankruptcy. Many of these owners will not only lose their business assets, but family assets as well as they commingle the two. These are sad and startling statistics that baby boomers are facing, as they have made huge sacrifices along the way to grow and maintain their business.

Small business is the backbone of the US economy. If we don’t save small businesses, we would lose numerous jobs, causing spending power to decrease dramatically which could push us into a recession. However, it doesn’t have to be all negative news as there are more buyers for good businesses than there are good businesses to buy.

The biggest mistake that business owners make is they do NOT plan their exit! They find themselves caught in the crossfire when a catastrophic event occurs.

The current economic climate is far from optimal. Unemployment levels are high, the vast majority of the stock market is unstable, and there is a coin shortage. All signs point to the United States entering a recession. If businesses adhere to advice provided by Seiler Tucker and outlined in Exit Rich, you can rest assured that your business will not only survive, but will thrive during these unprecedented times.

There are two key mechanisms through which an entrepreneur can keep their business afloat and exit rich. These include implementing the “Seiler Tucker GPS Exit Model” and making sure your company is operating on all six cylinders, or the “ST 6 Ps.”

The “ST GPS Exit Model” is extremely crucial for the success of a company. As Exit Rich notes, “without a specific plan, the company will continue to wander along and the goal of selling at an optimal price will be gone.” As such, implementing a plan from the get-go is vital. Similar to a real-life GPS, the “ST GPS Exit Model” helps a business understand its current location and final destination. The model involves 5 steps.

First, one must know their destination, their end game. Second, a business must evaluate its current location to derive its current value. Third, a business must determine who their buyers will be and build to suit these buyers’ criteria. Fourth, determine a timeframe to reach the company’s destination. And finally, a company must know its ‘WHY’. When a business follows these steps, they are far more likely to build a business that will be attractive to many buyers who are willing to pay top dollar for their business. It is of utmost importance that the GPS exit model is implemented even when operating during a recession. The model provides a framework for businesses to follow, thus preventing them from veering off the path and becoming a statistic.

Beyond simply planning an exit, it is also imperative for businesses to make sure they are operating at an optimal level. They can ensure they are doing so by making sure they are functioning on all six cylinders, otherwise known as the “Seiler Tucker 6 Ps”.

1. People: Do you have the right team? Is your team composed of individuals that are ready to adapt, pivot and innovate? Under the circumstances of COVID-19, it is necessary that your employees are flexible and able to think outside the box, thus keeping the company afloat even during uncertain times. Buyers want to buy a company with tenured employees and an excellent management team in place.
2. Product: The next step is thinking about your company’s product. Does your product have a niche or intellectual property? It should be refined and streamlined so that you can expand your brand across the market. During COVID-19, competition is growing even more intense as companies vie for the same clientele, placing an even larger emphasis on having a superior product. Buyers want to buy a business in a thriving industry, not dying. They want to ensure the company has multiple congruent revenue streams.
3. Process: Is your process efficient and productive? A great product can’t save a company that doesn’t have proven processes to market the product, collect payments due, or schedule meetings with clients. Buyers want to know that the engine under the hood of your company runs efficiently and isn’t held together with twine and baling wire.
4. Proprietary: Do you have intellectual property? (Brands, Patents, Trademarks, Databases, Transferable Contracts in Place, etc.) As aforementioned, the competition in industries has grown more intense because of the coronavirus. Due to this, having a product with the rights to dominate an industry gives it a significant leg up when compared to other companies.
5. Patron: Do you have a loyal, diversified client base who will go out of their way to purchase your products and services? Having a loyal, diversified client base is difficult to maintain during a pandemic because money grows more and more scarce, leaving individuals on the hunt for the least expensive product. Therefore, maintaining a strong customer base is vital to ensuring your company’s success.
6. Profit: Are you paying attention to your KPIs and operating at the highest profit margin for your specific industry? The coronavirus pandemic has put pressure on every industry, making it difficult for companies to squeeze out profits. During this time, it is essential for firms to evaluate their expenditures with a keen eye and cut costs wherever they can. However, keep in mind that lack of profits are not the problem, but rather a symptom of not operating on all the “ST 6 Ps!” If you don’t have the right people in the right seats, it will cost you more money. If you’re in a dying industry, you will lose market share, causing profits to decrease. If your processes are not efficient and productive, it will cost you more in overhead to run your business which will also decrease profits. If you do not protect your IP, it will cost you dearly in legal battles and market share, again causing you to lose money. If your clients are aging out and you have customer attrition, your profits will also decrease. The only way to build and sustain profits is to drive your company on all 6 cylinders, on all the “ST 6 Ps!”

It is unequivocally true that the coronavirus pandemic has taken a significant toll on our lives and businesses. It has been a public health crisis and moreover plunged the US economy into a recession. However, it is not all doom and gloom. Fortunately, it is possible for businesses to remain open if they adhere to the guidance provided in this article and learn how to PIVOT. Using these proven, trademarked methods will surely help all businesses to stay in business, even through something as detrimental as the COVID-19 pandemic. For more strategies and tips please visit exitrichbook.com.

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