When you started your company, did you plan to work until the day you die? Or did you intend to build a business that would provide financially for you and your family and one day give you your time back as well? Every business owner I have asked has answered the second way. Unfortunately, they haven’t invested the time in building the structure of their business to make their plan a reality.
Small businesses are the backbone of our economy. Unfortunately, too many entrepreneurs fail to properly plan their exit strategy from day one, inhibiting them from creating the underlying foundation, systems, and structure needed to build a business that will actually be salable. According to Forbes, 8 out of 10 business do not sell.
This is why I wrote Exit Rich® with my co-author Michelle Seiler Tucker, Founder and CEO of Seiler Tucker Inc. It will teach you how to build a sustainable, scalable, and sellable business. We share the 6 P’s® which are the six cylinders that every business should operate on that are essential to building a profitable and efficient business.
The first P is People, or the “Who” of your company. This refers to the management and employees that help run your business day-to-day. Buyers are looking for a business, not a job. Having a tenured management team and dedicated employees in place show that your business is sustainable.
The second P is Product. This refers to the product or service your company offers and the industry it operates in. It is important to determine whether the industry you are in is on the way up or on the way out.
The third P is Process. Processes are standard systems for running the day-to-day and long-term operations of your company. Processes should be designed with the customer experience in mind. They should be productive, efficient, well-documented, and used to train all employees. A great product cannot save a company that does not have systems to market that product, collect payments due, or schedule meetings with clients. That is why processes are essential to building an efficient and profitable business and will increase the value of your company.
The fourth P is Proprietary, meaning the intellectual property that your business owns. This could include patents, trademarks, branding, prime real estate, customer databases, contracts that are transferable, or anything else that makes your company special or unique including your reputation. This creates your competitive advantage which will drive up the value of your company.
The fifth P is Patrons. Patrons refer to your company’s client base. A sustainable business is nimble and can pivot when necessary. Many businesses today boast of great social media presence and high numbers of followers. The problem is that you do not own those followers, the social media platform does. So, it is imperative to invite those followers to join your database. Creating that customer journey builds loyalty, repeat sales and a higher value for any potential buyer.
The sixth P is Profits. Most buyers, unless they are Turnaround Specialists, are not interested in buying a business that is not making money. They want a business that will provide them with a return on their investment as soon as possible. Keep in mind that profits are never the problem but are a symptom of not operating on the other 5 P’s. As most businesses sell for a multiple of EBITDA, higher profits translate directly to a higher selling price.
The 6 P’s provide a great roadmap for evaluating and preparing your business for sale. They are a sign of positive synergies, which are what buyers are most interested in, and show that a business is efficient and profitable. Therefore, operating on all 6 cylinders will drive the value of your business up. It will allow you to demand a higher sales price, create bidding wars amongst buyers, and allow you to ‘Exit Rich’. As Steve Forbes said, “It’s stunning that so many business owners end up leaving so much equity on the table when they want to cash out. That’s why this book will be a gold mine for these entrepreneurs.”
Author: Sharon Lechter is internationally recognized as a financial literacy expert, keynote speaker and business mentor. She is a New York Times Bestselling author, successful entrepreneur, philanthropist, and has enjoyed a 35-year career as a licensed CPA. She has advised two US Presidents on the topic of financial literacy. Sharon co-authored the international bestseller Rich Dad Poor Dad and 14 other books in the Rich Dad series. In 2008, when the economy crashed, she was asked by the Napoleon Hill Foundation to help re-energize the teachings of Napoleon Hill. Her best-selling books with the Foundation include Three Feet from Gold, Outwitting the Devil and Think and Grow Rich for Women and Success and Something Greater. She is also featured in the movie Think and Grow Rich: The Legacy and on the national television series World’s Greatest Motivators. Sharon’s newest title, Exit Rich was released in June 2021 to support entrepreneurs in building value and scalability in their businesses so they can be in the position of greatest potential.