Profit Power: Exit planning a $5 million business

April 22, 2019 - By Jeffrey Scott

Photo: iStock.com/FatCamera

Is spring the right season to plan for your exit?

The answer is surprisingly “yes.”

A husband and wife team (running a highly efficient, high-caliber $5 million business) told me last week they want to plan for their exit. She didn’t mean they want to sell the business, at least not soon, rather that they want to start enjoying the fruits of their labor, including taking time off without their business faltering.

In the stress of spring, the owner wanted something to look forward to. Not just a long weekend or a vacation, but a time in her life when she can get a way for an extended period of time and relax — think sunning yourself in Naples, or skiing the best powder in the Rockies.

She was also concerned with the economy. What if it collapsed at the point when she actually wanted to sell her business? She wanted to know how to protect against ill winds, while enjoying herself today.

With these clear goals in mind. We set a compelling strategy in place that gave her and her husband comfort.

- Raise the efficiency and margins in their installation division, so it produces excess profit and cash flow (don’t just do install for love, it has to serve a higher purpose).
- Suppress “super fast” growth of installation in this hot economy (in support of point one) and transfer that energy to growing the higher end maintenance. This way when the economy takes a breather, the business will not be caught flat footed. (We set a goal for a specific service mix.)
- Develop a strategy for each maintenance account, so that the average margin is high by the end of the year, after all enhancements and services are sold.
- Improve the balance sheet so there is cushion; and teach the key managers how to read the balance sheet, so they understand where some of the excess profits are going. Do you set balance sheet goals that everyone understands?
- Empower the division leaders to read their own profit and loss statements, so they can understand how the margins and overhead interconnect, so they can take more ownership, and think and act more like owners.
- Ensure the bench is being built now, so that like a great sports team, it can handle injuries and attrition and still keep running strong.

All of these goals we can work on now, in the spring.

Are you planning to exit your business, but want to enjoy some of that exit “now”?

You need to start planning now, because now you are in high sales mode. Avoid the clients who suck your time, energy and profit. Bring in the right clients now, priced to support a healthy long-term exit. Sell for margin and employee empowerment.

Your challenge: If you are the only one who can read your profit and loss, or your balance sheet, then you are the only one who can truly run your business. That’s a lonely place, and not a good recipe for enjoying a healthy exit.