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Planning

Where to begin? At the end.

Grow a small business - start with the endOne of the first things I ask someone when I start mentoring them is “when do you want to sell?”

After a few blinks and an incredulous look, most pipe up and passionately retort with “I haven’t even started yet, why would I think about selling!?”  To which I go on to explain the crux of this blog – summed up by one of my favourite quotes:

If you don’t know where you are going, you will probably end up somewhere else! - Laurence J. Peter

Another key lesson I learned too late in business was not thinking about exiting from day 1.  I was – like many exuberant young entrepreneurs – too fixated and caught-up in the now, the adrenaline, the cool stuff we were doing.  If I had made sure I had a mentor, or had taken a mere few hours to consider the exit properly, I would have done a whole lot of things differently.

Here are some things you need to consider when thinking about the end, at the start:

  1. How does my business look when it sells?
    • Number of staff
    • Number of offices
    • Annual sales
    • Profit it needs to be making (and is that net profit, EBIT – Earnings Before Interest & Taxation)
    • Products and services it will offer
    • Organisation chart
  2. How much do I want for my business?
  3. How will my business be valued?
  4. What is valuable in my business?  What would a suitor pay more for?
  5. How much equity do I need to sell along the way to get to my exit amount?
  6. How will I sell my business, to whom?
  7. How long will it take to sell?

All these questions will influence the thousands of tiny decisions you will make in the coming years, and, having them in the back of your mind will enable you to make better decisions and therefore save time, and money, for when you are ready to sell.

What an entrepreneur should do when starting their small business:

  1. Take 30 minutes and write the answers down to the above questions and insert them into your business plan
  2. Draft the financial model for your business so you can start to see what factors will influence your sell price, and total take-away earnings
  3. Get at least one mentor

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