#176 The 5 Growth & Exit Principles and Recap of 2019's Top Interviews

Dec 18, 2019

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Host: Ryan Tansom

Happy Holidays, everybody! Today’s episode centers on reflection. We’re going to take a stroll through the most popular podcasts of 2019 and recap their best tips for entrepreneurs. Some of the topics I’ll cover include: Growth planning; social capitalism; serial entrepreneurship; financing options; and exit planning. (To name a few.) What better time than now to take a close look at your operations and efficiencies and see what improvements you can make next year?

So if you’re ready to learn how to operate an even better business or get a pinch more out of a deal, this podcast recap is for you. I even break down what the real Growth & Exit Planning principles are that Arkona and I work with every day as well to give you the best start to the New Year possible.

What you’ll learn:

The top Life After Business interviews from 2019
The top stories of owners who started, grew and sold in a variety of ways
An explanation of the 5 Growth & Exit Principles
How each of the top interviews relate to one of the 5 Growth & Exit Principles
How to focus on long term value creation with the end in mind using the 5 principles
Stories of entrepreneurs who figured out what they wanted from their business and why
Ways to increase the value of your business
The 3 financial targets you should identify and monitor
The 5 main categories of exit options
How to work with your team of advisors to optimize your growth and exit

Principles #1 – YOUR DRIVERS

What drives you to work in your business?

You’re choosing to work in your business (otherwise you’d be doing any of a hundred other things), so why are you doing it? The answer to this question will tell you so much about what you should be focusing your energy on. If you’re no longer passionate about the business you have, perhaps it’s time to shift gears. You might balk at the idea of exit planning, but that’s exactly what you need. Whether an exit means turning into a passive owner or out-right retiring, you need to start planning what your business looks like without you at the helm. You’ll be pleasantly surprised about how many opportunities this opens up for you to rediscover your passion in life and make sure you’re on the right track for it.

Here are the top episodes on Principle #1 from 2019:

PRINCIPLE #2 – FINANCIAL TARGETS

Are you doing bank-balance financing? If you’re operating your business based on what’s in your account (have money, spend money; no money, save money), then you’re not focusing on the right financial targets. Identify what those targets are and start building the value of your business!

You need to know the value of your business today, net of taxes and debt repayment, before you start to think about selling. If you don’t know that number, you can’t see if you’re close enough to your number to let go of your biggest asset. Figuring out how much money you need to live annually without the benefits of business ownership is a really good exercise for any entrepreneur. It tells you without a doubt if a deal is good for you right now and what you’d have to do to make your life after business happen the way you want it to.

Your net worth outside of your business will impact what you need and want to take out of sale is the bottom line. If you have a higher cost of living and expectations for your lifestyle, you’ll need more from your exit. If you’re often using your business for your entertainment, that will factor in as well.

Here are the top episodes on Principle #2 from 2019:

#131: Understanding Business Valuations & Value Drivers: How To Double The Value Of Your Company With Ken Sanginario
#153: How To Sell Your Business For An Outrageous Price With Kevin Short
#158: Learn How To Profit First & Take Control Of Your Business With Mike Michalowicz

PRINCIPLE #3 – EXIT OPTIONS

Figuring out the exit option that is best for you is tough work. You need to take into account so many things! This is why we have our Growth & Exit Planning Boot Camp so you can take the guess work out of what it’s going to take to give you the exit you need to be happy in your life after business. If you want to stay in your business and be a passive owner, you have other considerations to make regarding your financing options and potential buyer than someone who wants to completely exit and is looking to take top dollar for their business, hang what comes next. No exit is the wrong exit, just so long as it’s right for you.

The key thing to remember is that an exit doesn’t have to mean you are leaving your business. It can simply mean you’re taking a step back to focus on other things or perhaps rediscover your passion. However, you have to start planning like you’re leaving your business or you’re not going to see the growth you will need one day for your eventual retirement.

Here are the top episodes on Principle #3 from 2019:

#140: Selling The Family Business: A Son’s Perspective With John Garuti
#164: What Is An Esop: A Deep Dive How Employee Stock Ownership Plans Work With Dave Diehl
#156: The Great Game Of Business – The Only Sensible Way To Run A Company With Jack Stack
#144: The Messy Marketplace: Selling Your Business In A World Of Imperfect Buyers With Brent Beshore
#168: SELLING A BUSINESS TO A FAMILY OFFICE: AN INSIDER’S PERSPECTIVE WITH PAUL MOFFATT

PRINCIPLE #4 – INCREASE VALUE

Your business needs to be sustainable, predictable and transferable to increase your value.

The reality of selling a business is pretty bleak. There are literally a ton of loopholes that buyers can exploit to take down your company’s value. It’s up to you to make sure this doesn’t happen! The best way to tank-proof your deal, you need to show that your business is a solid investment. Showing that year-over-year you have turned a profit or increased value is the first step. But then you have to show how this value is going to continue into the future. Once you’ve proven that to your buyer, the only thing you have left to do is show them that all of this can transfer to them without taking a hit when you pass the reins.

Start finding ways to de-risk your business, including hiring the right people to help you find better efficiencies for increasing your value and avoiding major hits at time of sale.

Here are the top episodes on Principle #4 from 2019:

PRINCIPLE #5 – TEAM OF ADVISORS

How solid is your team of advisors?

No business of size and value is an army of one. It just doesn’t work that way; you can’t sustain the growth all on your own. So why are you still running your company as if you are the sole employee? You should not be the first contact for all roles. If you are, you’re either doing a disservice to the people you’ve hired or you’re working with the wrong people.

While you definitely want to like who you’re working with, sometimes it’s more important to find the right fit than sticking with who you know and love. A lot of us start off working with family and friends. Which is great, and sometimes that works for the long run. So many times, though, these people are quickly eclipsed by the business’ growth and are no longer relevant under the new structure. One of the toughest jobs of an entrepreneur is letting go of the wrong people while diligently hiring the right ones. But the people on your team need to be the ones who best know how to advise you based on your current level of operations, your market, and your goals.

The best teams collaborate and work with each other’s strengths. They know their stuff and when they don’t, they keep their egos in check to get the answers they need and help you get the best out of any deal. It will cost money to get these rock stars, but they pay for themselves. Trust me.

Here are the top episodes on Principle #5 from 2019:

TAILS FROM ENTREPRENEURS WHO HAVE GROWN AND SOLD

So many entrepreneurs experience the same growing pains. We have similar hurdles and milestones, and we understand the gamut of emotions business ownership comes with. But what if someone has been in your exact situation and has that wonderful hindsight that can help you out?

The more we talk about our experiences as entrepreneurs, the more we help each other out. When you find the perfect solution to a problem you have from someone who has been through it and learned their lessons, it feels so good. One of the biggest issues we come across when trying to learn about how to sell our businesses or even just generally about M&A is that so much has to be experienced before it can be mastered. Listen to those who have been there. And, when you have key advice to share, don’t be shy! You seriously never know who’s listening that can benefit from your experiences and knowledge.

Check out our top podcasts for entrepreneurs from 2019:

#129: $9m In Revenue, $4.5m Ebitda And A $55 Million Exit – With Stephanie Breedlove
#137: Why Culture Matters – One Bhag And A $38 Million Pe Recap – With Jill Nelson
Structuring The Deal: Equity, Debt, Mezzanine, Notes And More With Matt Boettner
#139: Lost And Founder – Tales From Startup To Exit With Rand Fishkin
#143: Female Viagra’ Founder Exits For $1 Billion And Gets Company Back For Free With Cindy Eckert
#152 Scaling From 0 To $170 Million With A 40 Hour Work Year With Scott Fritz

WHAT NOW?

Yep, that’s right. Growth and exit planning (like you’ll learn about in Arkona’s Boot Camp) are two sides of the same coin. When you plan to grow, you’re securing your exit; when you plan to exit, you need to spur growth to become a more attractive acquisition.

Look at revenue streams, debt ratios, operational efficiencies, and your key employees. Do you have all the roles filled on your roster that you need to accomplish your goals? Are there good barriers to entry around your niche, or do you need to create/find them?

It’s time to take a look at how you can de-risk your business in 2020 to improve your valuation. Whether you want to sell or not, you need a good valuation. You’ll attract better employees and financing deals, as well as achieve a greater level of industry influence. Think McDonald’s versus Carl’s Jr.

To do that, here are some of the top strategies to decrease your overall risk entering the new year:

Create a growth exit plan.
Make sure you have the right people in the right roles (skill set, knowledge, ability, and fit).
Implement EOS or other operational efficiencies to free up your valuable time and automate some of your business.
Check on your revenue and debt. Are they concentrated? Are they risky?
Attend one of our Growth & Exit Planning Boot Camps to give you the best action plan possible.
ARKONA Boot Camp
Reach out to me if you have questions about the boot camp!
You can also reach out to me via email at rtansom@arkona.io or on my LinkedIn