PODCAST REVIEW: Max Valuation Through Business Exit Strategy With Jessica Fialkovich — The Marketing Plan Formula©
Featured this week 10–24–23 in TheHub Mainstreet M&A news and events:
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The Hub Short Take:
Jessica Falkovich emphasizes the importance of having an exit strategy for your business from day one. She explains that most business owners wait too long to think about their exit strategy, which can lead to missed opportunities and increased risk. Falkovich outlines the four main exit options for business owners: closing down the business, selling to a third party (strategic buyer, private equity, or individual buyer), transitioning the business to family or friends, or selling to key employees. She also discusses the value drivers in a business sale, including risk removal and qualitative earnings. Having a clear exit strategy and a well-defined marketing plan can significantly increase the value of a business in a transaction.
Key Takeaways:
- Start thinking about your exit strategy from day one of starting your business.
- The four main exit options are closing down the business, selling to a third party, transitioning to family or friends, or selling to key employees.
- Value drivers in a business sale include risk removal and qualitative earnings.
- Having a clear exit strategy and a well-defined marketing plan can increase the value of a business in a transaction.
Quotes:
- “You should have options for your exit strategy because the plan doesn’t always work.”
- “Buyers want to remove the risk of customers and employees leaving after the owner exits.”
- “Marketing and lead generation can increase the value of a business in a sale.”
- “Having a good exit strategy and a well-defined marketing plan can significantly increase the value of a business in a transaction.”
The Guest:
Jessica Falkovich is the founder of the Exit Factor and one of America’s leading experts in selling businesses. She is also the founder of one of the fastest-growing and largest business brokerages in the country.
The Host:
Russell (★ The Chief Marchitect ★) Lundstrom as he calls himself on LinkedIn is the Pioneer of the Marketing Plan Formula where he built a simple 5 step formula that helps 7 & 8 figure founders create marketing that actually works for their business.
The Article:
The Importance of an Exit Strategy: Maximizing the Value of Your Business
by the team at How2Exit.com on request for the newsletter TheHub Mainstreet M&A Weekly.
As entrepreneurs, we often focus on building our businesses and achieving our vision. However, one aspect that is often overlooked is the exit strategy. Having a clear plan for how you will exit your business is crucial for maximizing its value and ensuring a smooth transition. In this article, we will explore the importance of an exit strategy and how it can impact the value of your business as it was covered in this interview.
The Value of an Exit Strategy
According to Jessica Falkovich, founder of the Exit Factor and a leading expert in selling businesses, having an exit strategy is essential from day one. She emphasizes that you never know what may happen in your business, and having a plan in place for how you will exit ensures that you are prepared for any situation. Falkovich states, “You should have options for your exit strategy because the plan that we design for ourselves doesn’t always work.”
Four Exit Options
Falkovich outlines four main exit options for business owners to consider:
- Closing the Business: This option involves milking the business for all its cash and eventually closing it down. It may be suitable for businesses with a short-lived trend or technology that is becoming obsolete.
- Selling to a Third Party: This option involves selling the business to a strategic buyer, private equity firm, or individual buyer. Falkovich notes that many small to mid-sized businesses are sold to corporate buyers or individuals leaving corporate jobs to pursue their entrepreneurial dreams.
- Transitioning to Family or Friends: This option allows business owners to pass on their business to family members, friends, or existing business partners. While less common in recent years, it can still be a viable option for older generations who value legacy.
- Selling to Employees: This option involves selling the business to key employees or the entire workforce. Falkovich highlights the importance of ensuring that relationships and contracts can be transferred smoothly to the new owner.
Value Drivers in a Business Sale
When it comes to selling your business, there are two main categories of value drivers: risk removal and qualitative earnings. Falkovich explains that buyers are primarily concerned about the risk of losing customers and employees after the owner exits. Therefore, mitigating these risks by implementing processes, systems, and putting the right people in place is crucial.
In addition to risk removal, Falkovich emphasizes the importance of qualitative earnings. These are the unique aspects of your business that make it more valuable to a buyer than simply replicating it themselves. Some examples of qualitative earnings include marketing and lead generation strategies, reputation, technology and innovation, and strong relationships with customers or suppliers.
The Impact of a Marketing Plan on Business Value
As a business owner, having a well-defined marketing plan can significantly impact the value of your business. Falkovich states, “If you can create a consistent lead funnel that is not reliant on a person, that’s very hard for a lot of businesses to do, then your business becomes more attractive to buyers.” A comprehensive marketing plan that identifies the most profitable customers, outlines effective marketing strategies, and measures their success can increase the multiple at which your business is valued.
Falkovich further explains that a strong marketing plan reduces the risk for buyers by demonstrating a reliable source of revenue and customer acquisition. By investing in marketing strategies that have been proven to work, you can increase your business’s profitability and attract more potential buyers.
The Exit Factor: Preparing for a Successful Exit
To help entrepreneurs navigate the complexities of buying and selling businesses, Falkovich has developed the Exit Factor. The program offers courses and consulting services to educate business owners on the process of preparing for an exit. The main offering, “Prep to Sell,” is an online course delivered over a year, covering various topics related to selling a business.
The course includes monthly accountability groups, where participants can connect with other business owners in similar stages of the process. Additionally, business valuations are provided to track the progress and value of the business throughout the course. Falkovich highlights that, on average, clients who have completed the course have increased their business valuation by 40%.
The Power of a Comprehensive Exit Strategy
By incorporating an exit strategy into your business vision, you can set clear goals and benchmarks for your future exit. Falkovich suggests starting with your ideal situation, such as the type of buyer, time frame, and desired net proceeds. This provides a target to work towards and helps align your business decisions with your exit goals.
Additionally, Falkovich advises considering emergency options in case unforeseen circumstances arise. These options may include selling to key employees or a larger pool of corporate buyers. By having a backup plan, you can ensure that you have options and avoid being forced into a distress sale.
Conclusion and Future Outlook
In conclusion, having an exit strategy is crucial for maximizing the value of your business and ensuring a smooth transition. By considering the four main exit options and identifying the value drivers in your business, you can create a comprehensive exit strategy that aligns with your goals. Additionally, investing in a well-defined marketing plan can significantly impact the value of your business by reducing risk and attracting potential buyers.
As the Exit Factor continues to educate and empower entrepreneurs, the hope is to increase the number of successful business sales and help business owners achieve their desired net proceeds. By providing valuable resources and support, Falkovich aims to change the landscape of entrepreneurship and ensure that more businesses are sold for their true value.
In the ever-changing world of business, having a clear exit strategy and a comprehensive marketing plan will continue to be essential for entrepreneurs looking to maximize the value of their businesses. By staying informed, adapting to market trends, and leveraging the expertise of professionals like Jessica Falkovich, business owners can position themselves for success and achieve their desired exit outcomes.
Join us next week as we continue to sift through the wealth of information out there, helping you understand what it takes to excel in today’s dynamic business environment.
Written by the team at How2Exit.com
