Business ownership is how most generational wealth is created. It’s created when an owner sells their business at the right time, to the right buyer, for maximum value. Unfortunately, however, too many entrepreneurs fail to build their business properly from day one. They lack the underlying foundation, systems, and structure that are essential to all businesses. This in turn prevents them from building a sustainable, scalable, and sellable business.
Why I Wrote Exit Rich
In 2013, when writing my first book, Sell Your Business for More Than It’s Worth, I researched businesses extensively. I found that 85-95% of small business startups will go out of business within the first 5 years. Startups were at great risk, and everybody knows that.
Then, in 2019, I did the same research for my newest book, Exit Rich. This time, however, I found that the business landscape had changed dramatically. Now, only 30% of businesses will go out of business in the first 5 years. However, 70% of businesses, out of 27.6 million, that have been in business for over ten years will fail.
You hear about the big box stores that are going out of business all the time. These stores include companies such as Toys R Us, Kmart, Steinmart, and Pier 1. But you don’t hear about the small businesses in every state across our nation that are dropping like flies. They will be forced to selling for pennies on the dollar, closing their business, or worse, filing for bankruptcy. And when filing for bankruptcy, you don’t just lose your business assets, but most likely your personal assets too.
This is where Exit Rich, my newest book, comes in. It’s the must-have guide that every entrepreneur needs to teach them how to build a profitable business. The book focuses on the ST GPS Exit Model® and the ST 6 P Method®. These two techniques should be utilized by every business owner, regardless of the industry they operate in. It will allow them to build a business that will attract a multitude of buyers, maximizing their sales price.
The ST GPS Exit Model
The ST GPS Exit Model is a blueprint you should use to build your business from day one. It helps you create the framework, for building, scaling, and selling your company. This keeps your efforts and energies focused on your desired endgame. The five-step model is as follows:
- Determine Your Destination – Desired Sales Price
- Know Your Current Location – Current Business Value
- Know Your Timeframe – When You Want to Sell
- Identify Who Your Buyers Will Be – Which Type of Buyers Will Pay the Most for Your Business
- Determine Your WHY – Your WHY must be powerful enough for you to weather the financial storms and keep you in the game
Following this model will help you plan your exit strategy from day one, something very few owners do. Even when owners do plan their exit, they seldomly have their desired sales price in mind. Because of this, owners are forced to sell their company at inopportune times, such as when catastrophic events occur. When this happens, it is almost impossible to maximize value, underlining the importance of following the GPS Exit Model.
The ST 6 P Method
The ST 6 P Method, on the other hand, are the six cylinders that every company should operate on. They are the most important factors to consider when evaluating your company and preparing for the sale. Through years of experience, we learned that buyers will pay top dollar for businesses operating on the 6 P’s. The 6 P’s are as follows:
- People: Business owners should evaluate their team to ensure the right people are in the right seats. After this, they can then ask the WHO question. Who deals with legal, customer service, accounting? The key here is that the owner should not be next to the who. The business should have a layer of management so it can run without the owner.
- Product: You should ask yourself whether the industry you operate in is thriving or dying. Do your product/services service a niche? Buyers are fearful of purchasing a business whose product or service could be obsolete in the near future.
- Process: Processes are often overlooked but should never be neglected. They can make or break your company in the eyes of buyers. Your processes should be designed with the customer experience in mind. Are they efficient, productive, and well documented? If you can nail down your processes, your business will grow exponentially.
- Proprietary: Proprietary assets, or intellectual proprietary, can act as one of the biggest value drivers for your company. Do you have intellectual property? (Brands, Trademarks, Patents, Databases, Contracts in Place, IP Real Estate, etc.)
- Patrons: Customers are one of the most important things in business. This is because customers bring your business revenue. It is essential to have a diversified, loyal client base. Without customers to fuel your business, it will run out of gas.
- Profits: Profits are the most profound P. This is because without profits, your company will not be sustainable. Is your business generating over or under $1 million in EBITDA (Earnings before interest, taxes, depreciation, and amortization)? Does your business have multiple congruent revenue streams and residual income? Remember, however, that profits are never a problem, but a symptom of not operating on the other 5 P’s.
Operating on all ST 6 P’s® is important to maximizing value. These are the characteristics that buyers will look for the most when purchasing a business. Once your business is running on all 6 cylinders, you can scale your company immensely.
These two techniques are crucial to building a sustainable, scalable, and sellable business. However, when it comes time to sell, it is also wise to align yourself with an advisor. An advisor who has been down your road before can help guide your company in the right direction. They can help build your company to the point where it is sellable and confidentially market your business.
Why This Book Is Must-read
The strategies presented in this article are key for small business owners to start and grow successful businesses. Owners that follow this advice put themselves in the best position possible to build a sustainable, scalable, and sellable business. According to Forbes, 8 out of 10 businesses do not sell. For more information on the strategies given here, and to avoid becoming part of this statistic, visit https://exitrichbook.com/!
Article submitted by Michelle Seiler Tucker
The post How to Build a Sustainable, Scalable, and Sellable Business appeared first on SmartHustle.com.
Source: Smart Hustle