10 Benefits of Having an Exit Plan
Benefit #1 – Make More Profit
Having an exit plan for your business is not something that you should only think about when it is time to sell. Ideally you would have your exit planned before you start or buy the business.
Lets be honest, running a food business does not usually leave you with a great deal of free time. It is totally understandable that many hospitality owners don’t have a plan in place when it comes to exiting their business.
The thought of using any free time to work out an exit plan (usually something that you may have heard about but are not too sure what it includes) is a very easy thing to put off.
In my line of work I speak to people looking to sell their business almost every day, in most cases by the time I speak with them the decision to sell has already been made.
In many situations this decision has been forced by circumstances that they did not see coming or they are simply just over it and by their own admission they should have sold a while back, many have also been trying to sell without success.
Selling a business when you are in this position is difficult, time pressure is much more likely to force you into taking less for the business and you can easily walk away with tens of thousands less than you deserve. If you need to sell quickly then the process can seem to take twice as long and the whole situation becomes more stressful for all involved.
If that does not sound like the type of approach that you would like to take then making a small amount of time each week to work on your exit plan can make a huge difference as and when you decide to sell.
The good news is that having a solid exit plan in place will also give you a more profitable, easier to run business in the short term.
With a strong exit strategy in place the ideal situation is that you will have a business that is ready to sell at anytime but you have to question yourself as to why you would want to sell such a profitable business that is not causing you too many issues.
I have seen first hand both with my own business sales as well as those of clients just what a difference a good plan makes. Over the next few posts I am going to outline ten of the benefits of having an exit plan in place.
As you will see many of these benefits will kick in almost immediately and will make your business more valuable and saleable.
In this first post we are looking at the profitability of your business.
There are several factors that affect the value of your business, one of the main elements (that you have control over) is the profit that the business generates.
In many cases the value of your business is going to be calculated and considered by working out a multiple of the annual net profit generated for a working owner/operator.
With this in mind it stands to reason that the more profit the business makes then the more valuable it will be.
Knowing your numbers is crucial at any stage of the business cycle and if you do not already know your key metrics and margins then now is the time to make start, don’t put this off any longer!
This does not mean that you have to do all of the bookkeeping yourself and become a financial whizz but it does mean that you should be able to see how your busines is tracking and spot any potential issues before they are allowed to get out of control.
In this video you will see just what a difference two small changes can make to the value of your business.
Once you have identified the way that you are going to start tracking your numbers then it is crucial that you do this regularly. Typically I would suggest that you do this at least every two weeks, weekly if possible.
When you have identified the most important KPIs for your business and your goals then you should be tracking and monitoring the results consistently.
It always amazes me the impact that this simple process has with my coaching clients and those that do not know how to do this are always surprised at how simple it actually is.
This will take you no more than one hour per week and, as you saw in the video linked above this can add significant value to your business and make you a decent bit of extra profit in the meantime.
What you track is going to depend on your own particular situation but I would suggest that you look at the following as a starting point.
- COGS %
- Labour %
- Gross Profit %
- Net Profit %
- Net Profit $
- Sales vs Last Month
- Sales vs Last Year
There are a lot of other metrics that you can add into this list but the trick is to make this quick and easy to do so that you keep doing it consistently, no excuses!
If you are not doing this already then give it a go for a couple of months, I can guarantee that if you are running the reports and recording the results yourself you are going to pay a lot more attention than somebody telling you what they are.
Own your P&L, weekly, monthly and quarterly results and record them.
Do this as a non negotiable and watch the numbers improve.
The example given in the video mentioned above puts $700 per week into your pocket, this is for a 2% reduction in labour and COGS. Even if you get half of that then that’s $350 for an hours work on this part of your Exit Plan. How does that compare with your current hourly rate?
I hope that if this is not something you are already doing that this post inspires you to at least try this for a short period of time.
I would love to hear how you get on, if you have any questions, comments or feedback feel free to post in the comments below.
Paul
P.S.
If you would like me to help you with an Exit Plan then check out The GSE Hub.
For as little as $99 you can get access to all the tools, resources and support that you need to create your exit plan and whenever you are ready you can execute the sale of your business.
If you would like to discuss your options then feel free to book in a 1:1 chat about your business here.
