You Need an Exit Strategy

Why You Need a Business Exit Strategy | The Inside BS Show with The Godfather and Nicki G

In this episode of The Inside BS Show, The Godfather and Nicki G explore why every business owner needs an exit strategy. Whether you're planning to sell, transfer ownership, wind down, or even if you're focused on growing and scaling your business, this conversation is for you. Having a solid exit plan not only prepares you for the future but also helps maximize your business's value and safeguard your investment along the way.

We break down both internal and external exit options, such as employee buyouts, strategic sales, and IPOs. You'll also learn about the 10 key drivers of enterprise value that are essential for every business owner to consider, including leadership succession, cybersecurity, sales systems, and more. These are vital whether you're thinking of exiting or simply strengthening your business for long-term success.

Tune in to learn how planning for the future today can set you up for the best possible outcome, no matter what your goals are!

What is Inside BS Show with The Godfather and Nicki G.?

If you are an entrepreneur, CEO of a private company, or leader of a professional firm, you need your daily dose of Inside Business Secrets.

Each day we address an issue that is top of mind for the entrepreneurial business leader. We discuss revenue growth, community building, succession planning, exit strategy, hiring top talent, over-regulation, and thorny legal issues. Our "secret sauce" is that we make you a part of the conversation.

The show is hosted by attorney/entrepreneur Nicola Gelormino (Nicki G) and author/consultant Dave Lorenzo (The Godfather of Growth).

This Miami-based duo shocked the ProVisors national networking community by building the largest and most influential group of professional advisors in less than a year. They interview and share valuable insights daily with CEOs, entrepreneurs, and business leaders.

A new episode drops daily at 8 AM.

To connect with Dave Lorenzo, call - [phone]
To connect with Nicola Gelormino, call - [phone]

Every business owner
needs an exit strategy.

Wanna find out why you gotta join
us for this episode of the Inside

BS Show? Hey, now I'm Dave
Lorenzo, the godfather of Growth.

Here with me today is Nikki G and
we are talking about exit strategy.

That's right.

We're talking about why you as a
business owner need an exit strategy,

and if you're an advisor,

why you need to share the
exit strategy secrets we're

going to give to you today with
your clients. Thanks for joining us.

It's great to have you here. Good
morning, Nikki G, how are you?

Good morning, Dave. I'm
doing great. How are you?

I'm doing fantastic, thank you. Alright,

here's what we're going to do today.

We are going to cover the seven
questions that we get most

often about exit planning.

And we're going to do that so
that you have a good foundational

understanding of why we do what
we do, why you do what you do,

why we do what we do, and
why business owners need us.

So, Nikki G question number one.

What is an exit strategy?

Great question, Dave.

An exit strategy is having a planned
approach as a business owner to

transition out of the company. There
are a number of ways to do that.

Oftentimes we see the sale of a company
or we see a transition in the ownership

shares of a company,

or we may see a winding down depending
upon what's going on with the business,

but it's having a plan in advance and
not allowing that to unfold as you are in

an exit that's occurring at that time.

So having a plan in place and making sure
that there's a nice smooth transition.

So what we don't want to see with an
exit strategy is a bumpy road, right?

You haven't planned for the exit and now
everyone is adjusting as everything's

unfolding. If, for example,

you've announced your retirement abruptly
or something has happened that has

caused you to have to exit the business.

Another important component of this
for us, especially in exit success lab,

is driving up that business
value. So having a plan in place,

having it in place early,

allows us to drive enterprise value in
that business years in advance of that

exit and ensure that smooth transition.
So Dave, let me ask you this. Well,

we'll move to question number two,

which is really related to what
I just discussed. You know,

why is it important for everyone
to have an exit strategy?

Uh, that's such a great
question. So there are,

there are a couple of reasons why it's
important for everyone to have an exit

strategy. The first is for
contingency planning purposes.

So what, what's gonna happen,
you're the business owner.

Let's say you're a sole practitioner,
first and foremost, or you're,

you're a solopreneur and you
have, maybe you have a team,

but it's just you leading
the charge. If you get sick,

who's gonna run the business?

If you need to take time off to
tend to a family member who's sick,

who's gonna run the business?

If you wanna go cruise
around the world for 90 days,

who's gonna run the business?

So contingency planning purposes is the
first reason you need to have an exit

strategy.

The second reason you need to have
an exit strategy is to maximize the

value of your business.

A business that can't run
without you is a job. It is

not a business.

We've all heard the Michael
Gerber E-Myth strategy

of working on the business,
not working in the business,

and that's great.

But what Nicola and I focus
on with our clients is working

over the business, treating the
business like an investment.

So if you don't have an exit strategy,
your business can't be an investment.

'cause your business is dependent on you.

What you need is a well thought out plan.

That's a roadmap for the
change that's gonna come,

whether you like it or not,
voluntary or involuntary.

If you don't have an exit strategy,

you're gonna be forced at the
end of the day to take less

money or maybe even no money when
it's time for you to wind down the

business. So contingency
planning is one reason,

and the second reason is so that you
can have the most options when you're

ready to ride off into the sunset.

And even if you don't wanna
ride off into the sunset,

you need to have some sort of a plan in
place so that that investment can keep

paying dividends to you while you go do
your thing cruising around the world.

So let's get into this a little bit
deeper. Nicola, talk a little bit about,

if you will,

contingency planning or planning
for an unanticipated exit.

Sure.

Oftentimes we see that unanticipated
events can occur in a business and it can

immediately stop the business
if the owner's responsible
for the majority of the

functions or other leadership is.

So having that plan in place allows
you to avoid those disruptions in the

business and continues to build
value for you. So, for example,

maybe the owner has a sudden
illness, gets in an accident,

or unfortunately has a sudden death.
Now, when that happens, that's it.

Business comes to a halt without a plan.
So having a plan that incorporates,

for example, having interim management
to step in that knows what to do.

So it's, it's not only the
people, but it's what do they do?

So having a plan for operation so
they know what they will be doing

ensures that the business can continue
to run as smoothly as possible given the

disruption. Having that plan also
helps you with your customers,

with your employees, because when
there is a disruption to the business,

all of them are impacted. It's not just
the leadership of the organization,

it's everyone you're working with.

So you don't want to have that
business look like chaos is going on,

and we can avoid that largely by
having a plan in place. Of course,

there'll be minimal disruptions,

but you can largely avoid
that by having that plan.

Let's move from contingency to
your, your actual exit plan.

So let's talk about Dave,

like what are the three exit plans that
a business owner should have in place?

The three mandatory exit plans that we
make all our clients put in place really

relate to what you were talking about,
uh, when it came to contingency planning.

So I like to look at an
employee ownership option,

a management buyout option,
and a CEO replacement option.

The employee buyout option
for larger businesses.

So businesses that probably
have north of $5 million in

EBITDA or north of $5
million in pre-tax earnings,

probably north of $10
million in annual revenue.

You can look at an esop, an
employee stock ownership plan.

That's a great thing to have in place,

a great contingency plan to have in place.

'cause you can trigger
it anytime you want.

It can be triggered at an event
that occurs where you need to get

out as an owner in short order. So ESOPs,

the challenge with them is
they can be a little pricey.

H hiring really good
advisors, attorneys, trustees,

getting everything in place.
It can be a little bit expensive to set up

upfront.

So you probably need to be a larger
business in order to have that.

Now there's another option called
an employee ownership trust.

And I've also done some
really interesting things,

particularly in the professional
services space with creating a

pool of shares for employees to draw

from or for,

from the partners to grant
shares to employees so that there

is an employee ownership opportunity.

That's a great thing to have in place
because the employees can then take over

ownership. It's a great retention
tool, and the employees are vested.

The employee's behavior reflects
their overall investment in the firm,

and it is a really great
opportunity for them,

and it's a good tool for you as an owner.

The second contingency plan
that we want to have in place,

mandatory exit plan is a management
buyout. The reason that I

talk to business owners as early as
possible about a management buyout is

because you will hire and
select different people

to bring into the ranks of your
management based on the fact that these

managers are someday going
to be owners of the company.

You're not gonna hire,

or you're less likely to hire a
manager who's just a temporary

sort of stopgap. Just keep
the lights on type manager.

If you are counting on your management
team, hopefully to someday buy you out,

you'll be focused on bringing in people
who you would consider more along the

lines of partners or potential
partners or future partners.

So focusing on a management buyout,

even if it's an unstated
management buyout.

So you don't have to tell them in advance,
Hey, one day all this will be yours.

You don't have to do that if you don't
want to. But having that management

buyout option in place for you with a

focusing on having that mindset
in place is a great way to

prepare for the future. Now I know
what you're thinking. Hey, Dave,

if all my managers were
capable of owning the company,

if you know I'm gonna sell the
company to my five key managers,

I probably would have to pay
that type of person a lot more.

I'm not saying that every key manager
in your company needs to be ownership

material today.

If you're not planning for your exit
for 10 or 15 years down the road,

start with your top one or
two people. Say to yourself,

could I envision myself as I
bring this person on board,

eventually giving the keys to the company
to this person? If the answer's yes,

you got a good foundation, you got a
good start. So you top sales person,

your top operations person, your top
sales person, your top finance person,

your top operations person, and your uh,

your top business development person,

those people are the people who could be
the foundation for a management buyout

in the future.
That's a great way to think about it.

The third and final management strategy
that we wanna have in place for an

exit plan.

The third and final contingency strategy
that we want to have in place for an

exit plan is what I call A
CEO replacement strategy. Now,

this is an in case of emergency
break glass strategy. What it is,

is it's a relationship that
you or your HR person or a

combination of you and your
team leaders have with a

recruiter, a headhunter,

and that person is a
specialist in sourcing CEO

candidates or outsourcing
temporary CEO candidates in

some industries,

these these firms may be called seekers
where they'll invest in the company and

put a CEO in place.

You need to have an option for
someone in your company to go out

and bring in a temporary
or fractional CEO to

run the company on a day-to-day basis.
While the management

team or your spouse or whoever is your,

uh, your whoever are your heirs,

will find someone to replace you to
kind of shepherd the company along

or to put in place a sale
so that the company can be

guided toward the exit
if you suddenly happen to

pass away or are incapacitated. So again,

that CEO replacement strategy
is finding a fractional

CEOA temporary CEO or a headhunter
to bring in a fractional

CEO or a temporary CEO
guided by the person who

is going to inherit your
shares should you become

incapacitated or die. So, employee
buyout, management buyout,

CEO replacement strategy,

those are the three exit plans we want
all business owners to have in place.

And it's, it could be
as simple as having a,

a book a notebook with these
plans written down in it,

or it could be as complex as
a formal written plan document

with a copy in the hands
of your corporate attorney,

another copy in the hands of your exit
planning attorney and a third copy in the

safe in your office. That's what
you need to have in place right now.

So if you can hear my voice right now,

if you're watching this on video
right now and you own a company,

those three strategies
should be in place today.

If you don't have those three
strategies in place, give me a call,

give Nicole a call. 'cause you gotta
get 'em in place right now. Nicole,

you have any thoughts on that before
we move on to the next question?

I think you did a good job of explaining
that. I think so just to highlight,

these are really the internal
exit strategies that we
focus on in our business.

So we have both,

we have internal and external
exit strategies that we
want business owners to be

thinking about.

All right,

so now let's touch on
the three external sale

options for our business,

the three exit strategy options
for our business that are external.

And these are the three that we
talk about the most. One of them,

multiple of them or all of them
may be appropriate for you. Nicola,

why don't you go into what the three
external options for an exit strategy

are for business owners?

So the first that we, uh,

we talk about in this community
is a sale to a strategic.

And what that simply means
is a sale to a competitor,

or it could be a company that just is
interested in the business and will have

synergies with it.

There is an entire market that
your business may be sold to

because it has value to those particular
companies, especially competitors.

Oftentimes we have these
conversations, we see that, you know,

o owners will just view the competitor as,

as such that it's just someone
who's trying to eat away
market share and take it

from them.

But oftentimes we see those competitors
come around and approach those owners

because they want to
purchase the business,

given that it could help them generate
more revenue in their own business.

So think of it as just finding a,

an entire market where you will receive
a higher value for that business because

your business is particularly valuable
to them. There's a value there that is

not market wide.

It is because that business will have
some overlap with yours and will see

additional value in it that the
rest of the markets will not see.

So that's option one.

Option two for us is a private equity
sale. Now, I know what you're thinking.

This is, this is the gold standard.

Every business owner wants
to sell to private equity.

We have this discussion all the time.
It's can you know, can we get there?

And I think there's a lot of folks that
think that there's a significant amount

of private equity sales occurring in
the market, and that's not the case.

So this option is a great option,

but it's going to be one
that is not as common.

And the reason for that is because those
companies are looking for very specific

businesses to buy.

It has to make sense for that particular
firm. It's gotta be in a space where

they're building, for example, maybe you,

you could be an add-on to another company
and that they're putting together a a

group of companies or you could be the
platform to which the others are getting

added on,

in which case you would receive even
higher value if you were the platform

company. But private equity is very
specific, what they're looking for.

There's certain industries that
they focus on in particular,

and that also works with the
market. So it could be, for example,

home services businesses that
private equity firms are after.

So they're looking for a group of those
in the market, gobbling them up, uh,

depends again on market factors
and, and what they're after.

But that sale to private equity
certainly is going to take a strong

look at, you know,

what your key drivers are and how well
they're performing. We're going to get

into that in a little bit more detail,
so I won't dive too far into that.

But that's going to
matter for private equity.

They are really going to scrutinize
every aspect of your business to see,

you know, are you operating in a way
that is going to make sense for them?

And if you are, then that your business
may be considered for that sale.

And if not, then maybe it still will be.

But there's going to be
significant discounts associated
with it if it is not on

par with what they are looking for
and all of these different drivers.

And then finally,

the third sale option that we look
at for an external sale is going to

be in public offering.

So an initial public offering or
taking the co the company public,

that is not for a lot
of companies, that's,

I would say that's the least common option
because there are a lot of factors at

play there,

whether the company even wants to
consider going public and also can the

business allow for that to happen. Most
of the times you're looking at a really

high growth company that's going to
be even considering going public. Um,

if that is a consideration for your
business, it is incredibly complex.

There's a lot of regulation involved.

There's going to be a lot of legal
work involved. It's, it's highly,

highly complex to be able
to take a company public.

So not an option that most
folks would be considering,

but certainly one that we have to
consider with the businesses that we work

with. So again,

those options are going to be
strategic sale or sale to a competitor,

a sale to private equity or
an initial public offering.

I feel like the IPO option
was incredibly popular

in the eighties and in the nineties
before private equity really burst

onto the scene and was
focused on, you know,

grabbing companies and combining
companies and doing those

sorts of things. I I
actually was part of, uh,

an IPO, one of the companies I worked
for was part of an IPO. They ,

they went public and then they were
immediately bought by Marriott right after

they went public.

The whole purpose of them going public
was to make the purchase by Marriott

International easier for them. And it was,

the business at the time was, you know,

it was significant, but today it
would have to be more significant.

So kind of the rule of thumb to
think about is if you wanna think

about an initial public offering,

your business should probably
be doing 75 or a hundred million

dollars in annual revenue in
order to even think about it.

Even then, that would be kind of
a small initial public offering.

You're probably going to be pursued
pretty heavily by private equity funds if

you grow the business to that level.

And their offers may be quite generous,

probably more generous and, uh,

slightly less onerous than an IPO.

So my thought process is strategic
sale or a sale to private

equity. That's what most business
owners are looking at. They're, they,

they have an eye toward.
But to be candid with you,

if you are doing 75 a hundred million
dollars in annual revenue and you want

to run your business like
you're preparing for an IPO,

a private equity sale will
be it. You'll be able to,

you'll be able to get through the due
diligence period with a private equity

sale. Those of you who are listening here,

you're probably not running businesses
of that size. So strategic sale,

private equity sale, IPO, those are the
three. All right, let's talk now Nicola,

about the 10 drivers of enterprise value.

'cause one of the questions
we get all the time is,

what are the 10 key drivers of
enterprise value for any business?

And people wanna know how each
of those kind of fits into

exit strategy and exit planning.

Why don't you take the first two and
we'll go kind of two by two and cover each

of these,

just touching on the tops of
the 10 drivers of enterprise

value as an intro for our
folks who are listening,

the folks who are watching today.

Of course. And so to be clear,

the 10 key drivers are those that
we've identified in exit success labs.

So this is not, you know, just
a, a market 10 key drivers.

These are our 10 key proprietary drivers
that we've identified that we believe

apply to any business in any industry,

and regardless of where it is in
its lifecycle. So that first one,

the first one is there for a
reason in place number one,

which is your diversity and
quality of revenue streams.

You hear us talk about this often and we
can't talk about it often enough given

how important it is for driving
profitability and revenue, the business,

when we say quality,

we're looking at what's the quality of
the customer base and do we need to,

for example, diversify that
customer base because for example,

the business is too
dependent upon a single,

a single customer or a single set of
customers. And then we also look at

diversifying the revenue. So diversifying
the revenue in different ways,

for example, like geographically for
example, by, you know, other businesses.

So it's,

it's focusing on both aspects of that
and making sure that your revenue is not

coming from a single source,

but you have multiple streams and that
revenue is recurring in the business so

that you have predictability
in the revenue stream.

Second point we look at is leadership
development and management succession,

making sure that you have a
plan to develop the leaders
that are already part of

the organization and have a management
succession plan is what is going

to drive the growth, not only the growth
of your business, but sustainability.

So this is really kind of the,

the core group that's going to keep
that business where it is and moving

forward.

So it's important to have both in place
a plan to have leaders on the track to

develop, so you know, you're investing
in those employees and for management,

having a plan, having a
succession plan in place,

which is something else that we work on
with respect to the second key driver.

So Dave, let me turn it over to
you for key drivers three and four.

All right, key driver number three
is standard operating procedures.

This is something that I like to beat
the business owners over the head with.

People need to have guidance
for doing their jobs.

If you don't have a plan in
place for how to do every

single task in your business,
you're leaving money on the table.

Start with the biggest
tasks and narrow them down.

Have the people in the organization
write down step by step how they do the

most important things that
they do day in and day out.

Then get granular,

continue to develop and
improve these standard

operating procedures on a
regular basis. Document them,

have them written and put them in.

You can have them in binders in
each department in your business.

You can have them in the
hard drive that is onsite.

You can have them in a file on the cloud.
You should also have them in your

knowledge management system.

You should have these standard operating
procedures in as many different

places saved and updated as
regularly as possible so that people

coming in, whether it's new employees,
new managers or new ownership,

can read through a standard operating
procedure and have a guide to doing

any job, any task, any
role in the company.

I can't stress enough how
valuable these standard

operating procedures are.

It can add literally
points to your bottom line.

You can get more money for your
business if you have standard operating

procedures in place because new
management coming in will be

able to look at them, read through them,

and evaluate the people
who are doing the work.

Standard operating procedures
are great for the ongoing

managing, uh, and leading of your team,

but they're also great for when you're
ready to sell the business. So one of the

top things,

fastest ways to improve the value
of the business is by documenting

the standard operating procedures
that are already in place.

Number four is human
resources best practices.

So every business is a compilation of

the talent of the people
that work in that business.

How you recruit, hire, retain,

engage the talent that is
part of your company is

it's, it's critical to the
success of your company overall.

So your policies, your
practices related to hr,

that is the fuel that
makes the company go.

Who do you select? How do you
select them? How do you find them?

How do you onboard them?

How do you make sure they stay
engaged and they're successful?

What's your performance
appraisal process look like?

What is your training
process for your people?

What's your training
process for your managers?

How do you determine who becomes a leader?
All of these things are HR

practices plus all the admin
aspects of your HR practices.

You need to have these buttoned down.
You need to have them nailed down.

Now there's a shortcut. If you're a
smaller business or a mid-size business,

you can bring in, uh, A
PEO, you can bring in a, uh,

a professional employer
organization that will work with

you on a, almost like a co uh, a co, um,

ownership basis of your employees.

And they will manage all
the administrative aspects
of your business for you.

You still have to be a leader. You still
have to engage and train your folks,

and you still have to have
policies and practices in place.

So my advice to you is when
you grow to beyond 10 or

15 employees,

look to bring on someone who is
focused on employee engagement,

employee recruiting, employee
retention and onboarding.

Even if you decide you wanna help
have someone help you with the admin

functions of your human
resources best practices,

no matter what you do, this is gonna
be an area that is scrutinized,

that is poured over by someone
who's looking to buy your business.

So you better have these in
shape in your company from day

one. So those are the first
four. Now for number five,

we're gonna turn it back over to Nikki
G for something that's near and dear to

her office.

That's right, legal risk
and exposure, .

So there's two aspects of this.

So the first of course is identifying
and minimizing the areas of risk and

exposure in your business because you
want to avoid disruptions and expense.

So are you in compliance with all the
laws that are applicable to your business?

Are you reviewing regular policies
and procedures that are in place?

Hopefully you have policies
and procedures in place.

Are you keeping up with changes in the
law and making sure that the business is

in compliance with those?
Because when you fall out,

that's where you can become most
vulnerable, most vulnerable to disputes,

lawsuits and disruption
inside of the company.

And that's what's going to not only
cost money for the business, but time,

time at the C-suite level, the
managerial level, the employee level.

I mean I've seen it all. And you,

the last thing that you want is a lawsuit
because that's really where everything

comes to a halt and time is being spent
on that rather than keeping the business

running. Now the second aspect of this
that I think is often overlooked that

we focus on is how this
drives value for a business.

So by the time you get to
the due diligence phase
because you're ready to have a

successful exit of the business,

this is going to be heavily scrutinized
and anything that is a problem is going

to be exposed there. For example,
do you have pending lawsuits?

Are there threatened lawsuits or are there
just problems with the documents that

you have in place? Maybe they're dated,

maybe you're not in compliance with
some of those areas of the law that you

should be.

And that's going to cost a business owner
a lot in due diligence because you're

gonna have to go back
and fix those issues.

That sale is not gonna go forward if there
are legal issues associated with that

business because a buyer is not going to
want to inherit the problems. So that's

going to cost time and,

and certainly in terms of a setback for
what the timeline is going to look like

for that sale,

and it's going to cost an investment to
make sure you're correcting all of it.

So taking care of these now and laying
that foundation as you're moving forward

in a business is going to save you a lot
of time and expense in the long run and

prepare for that successful exit.
The next driver on our list,

number six is brand reputation.
Your brand is a powerful asset.

That asset can have its own independent
value when you're looking at the time of

a sale,

depending upon how strong that brand
has become and outside of its value,

it has value with your customers.
When you have a strong brand,

people want to do
business with the company,

they start to recognize the company,

there becomes a familiarity and level
of trust in doing business with the

company associated with that brand.

So using that brand allows you to engage
with your customers and be able to

retain customers in the long term.

So that's why we focus on brand
reputation and developing a powerful brand

because, and again,

adding value to that business by the
time you're at a successful exit and

helping you with that customer base
and making sure that you're developing

credibility with your customers and have
that loyalty so that they stay with you

in the long term. Dave, lemme
turn it over to you for seven and.

Eighth. All right,

nu number seven is sales
and marketing systems and

support.

Where is the money gonna come from
if you don't know your business isn't

worth? Well, it isn't worth anything.

You need to have a system and a process
in place for identifying, finding,

uh, attracting, closing, and
onboarding new customers.

So your sales and marketing
systems and support is critical.

You need to be able to highlight the
customer journey all the way through from

the time when you suspect they
might be a customer to you, to,

when you convert them into a prospect,
they raise their hand, say, yes,

I'm interested in what you have to say,

I want to hear more to the time when
the prospect converts into a client,

to the time when a client
becomes a repeat client,

until the point where you can
measure client lifetime value.

All of that is in your sales and marketing
systems and support. If you don't

have systems in place, your
business is not saleable.

We need to know where your
next dollar is gonna come from.

Sales and marketing systems. That's what
will help you be able to point to that.

That's what's essential
for you to have in place.

And the better your sales
and marketing systems are,

the more money you'll get
for your business overall.

Number eight is market, industry
and supplier conditions.

Can you imagine if you had a
business that was dependent on

one supplier to provide you
with raw material to make your

product or your service, and then
that supplier for whatever reason,

had a disruption, they closed
down, they went bankrupt,

they went outta business,

there was a pandemic where they're
located and they were no longer able to

produce for you.

Your business would come to a halt
until you could find another supplier.

So analyzing market,

industry and supplier
conditions is critical.

And you need to be able to adapt to
the market dynamics that are constantly

changing, having a plan in place,

a primary supplier and
a secondary supplier,

a market where you're doing business
and a secondary market where you're also

doing business.

Industry focuses where your
clients are concentrated and

secondary industry focuses.

Having alternatives in place
is a really good thing.

The more diverse your
market penetration is,

the more diverse your
customer concentration is.

The more diverse your
suppliers and supply chain is,

the better off your business is, the
higher the value of your business.

So we wanna look at market,
industry and supplier conditions.

Make sure that you're not
concentrated in any one market.

You're not dependent on any one supplier.

You don't have any one industry
that is providing you with all of

your revenue. All right, Nikki g,

bring it home for numbers nine and
10 on the 10 drivers of enterprise

value.

All right, number nine, financial
conditions and reporting. So here,

this is the health of your business.

Your books show the
health of your business.

It is incredibly important for you to
make sure that those books are done

correctly from an accounting perspective.
And everything there is nice and neat.

That is often the first stop in due
diligence is let's look at what the

financials show. Why, because we need
to see how healthy this company is,

how profitable this company
is, and what's been going on.

And oftentimes we have a partner
we work with in our community as,

as you all know, Roski corporate advisors.

And they work with a lot of businesses,

including very sophisticated
ones whose books are a mess.

And it takes time to clean
all of that up. It's,

it's often surprising because you assume
that more sophisticated businesses,

larger businesses have all of that
in order. That's not always the case.

And it takes a long time to be able to
go back and to clean up those books to

make them to the point
where they're nice, neat.

They show that the company is nice
and healthy by the time you get to due

diligence. So very important
to be focusing on the books,

making sure they're done right,

making sure they're done in the right
accounting standards too. So for example,

if you end up in a trans,
a private sale, a business,

there's gonna be a quality of
earnings report that's done.

And that's going to look at, you
know, what accounting have you used?

Have you used gap principles
for accounting to make
sure that your business is

in compliance with those? And if not,

then you'll likely have to go
back and use that. So again,

just making sure those books are nice
and in order is going to be a an early

stop for you. So make sure that's done.
And then finally, driver number 10,

the one that should be keeping
every business owner up at night,

which is cybersecurity risk and
information Technology systems.

This is all about protecting
your digital assets.

So are you protecting your data properly?

Are you protecting the systems
in your company properly?

There's always going to be cyber
threats out there. For example,

we are all susceptible
to phishing, to malware.

Things that are out there every day trying
to get our attention and to get us to

click on that link are
going to happen. It's just,

do we have that plan in place to best
protect ourselves against when that does

happen? So we look at just high level,

we look at three different areas when
we're dealing with cybersecurity,

we're looking at the human aspect
of it, which is the people.

Have you provided education and training
for those in your company? Do you have

policies in place that are going to
help you implement the guidelines that

you've identified to use to protect that
information for the company? You know,

second, we look at the processes.

What are you doing in order
to make sure that's protected?

And then finally the tools,

like what specific tools are you using
to help carry out those processes and to

make sure that you are protected.

So an area of business that should be
keeping everyone up at night and that we

ought to focus on because
of how important it is.

And you've gotta have a plan in place.
That's the biggest takeaway here,

is having a plan in place and having
a multi-layered defense system really.

'cause it can't just be one
thing. It's not simply, well,

we made really strong protected
passwords, or we have a firewall.

It's holistic system that really works
together to protect that business.

And it's gotta be layered
because if any one layer fails,

you have multiple backups to help save
you and to help save your information

from being exposed or
being lost altogether.

Great job. Really well said.
Okay, so the final question is,

how does a business owner determine
which driver of enterprise value to

focus on first? You know,

I will tell you that the best
thing for you to do is to

go through all 10 of these
and prioritize them in

order of exposure.

So prioritize them in order of
where you are most deficient.

Rank them one through 10,

and then next to each of the drivers,

write the name of the person in your
company who would be responsible for

fixing,

shoring up or managing that
key driver of enterprise

value. Now, don't be,

don't be panic stricken if you don't
have a person in your company for every

single one of these,

this is the point where you call us
and we will help you look through

each of these drivers and we can connect
you with professionals who work in

each of these areas.
Nicola and I,

we do some of our best work in two of
those 10 areas, but if we're really busy,

we may recommend other people to
do the work in those areas anyway.

So that's the reason why we've
built the Exit Success Lab

community.

And that's the reason why the
consultants that we work with are

so important.

We do not work in all of these areas.

We may come in and do an overall audit,

and that's the second point
I wanna make about this.

If you're not sure where
to start, you can call us.

We'll come in and do an overall audit.
It's very much like a strategic plan,

which is also something that
we do in Exit Success Lab.

We'll look at all 10 of the drivers
and we will rank your exposure for

you,

and then we'll sit down with you and
decide what you should start on and where

you should start and who you should call.
But the consultants that we work with

are critical because they're the ones
who help the clients fix each of these

areas.

Our focus is on helping
business owners grow and helping

business owners scale their business and
helping them do so in a way that gives

them the most options when
they're ready to exit.

So if you're listening to this
podcast or if you're watching the show

and you are concerned about

growth and you're not at
all worried about an exit,

this is something you should
be focusing on because it's,

it will help you grow faster and it
will help you create a more valuable

business. It will help you
create better, stronger,

more durable revenue streams
that are predictable.

If you're thinking about an exit, but
it's 10 or 15 years down the road,

that's the perfect time to
call us. By the same token,

if you're thinking
about an exit in a year,

you need to call us right away because
there are some things we can do

immediately to help increase the value.
So determining which

driver to focus on first
really is dependent upon three

things. Number one,

what your biggest needs are as a leader
and where you think the biggest exposure

is. What's keeping you
up at night? Number two,

what your intention is for the
business wanna sell tomorrow.

There's drivers that we can
focus on that'll increase
the value of your business

from today to six months
from today in a dramatic way.

We can help you do that
really, really quickly.

If you don't wanna sell immediately,

then there are some longer term things
we should be doing in addition to the

shorter term things that be that we should
be doing. So what your intention is,

that's the second thing to think about
as you determine which drivers you should

focus on. And then number three,

the third thing you should
think about is overall,

what is the way that you
can have the most impact

on your business for you personally?
After

all, this is your business.
What will make your life easier?

If you're not planning to sell in the
next two or three years and your growth

is good and you're scaling your business
and you're happy with your growth,

but there are just some
things that are bothering you,

there's some things that
you can't handle anymore.

There are just some things
that you don't wanna do,

then maybe you should look at those
key drivers of enterprise value

and begin to put plans in
place to make sure those

are handled with or without you so
that you can step away from them

and you can have a positive
impact on your wellbeing.

So those are the three areas. What
are your intentions for the business?

What's the biggest vulnerability?
What's keeping you up at night?

And what would you like
to have fixed so that

you can step away from
it in your business?

And we can put it on autopilot so
it can run with your oversight,

but without you involved
in the day to day. Nicole,

you have anything to
add before we close out?

I would like to emphasize something that's
really critical to what we do in Exit

Success Lab associated
with these 10 key drivers,

which is that we want to start looking
at this with business owners as early as

possible.

We're not talking about just when you're
upon an exit or you're just a couple

years out. Yes, we can add value
there, but that's often the the last,

the last stop that you can last exit.

You can take off the expressway
to start adding some value.

We wanted to start at the beginning.
We wanna start at the beginning. Why?

Because that helps us drive value over
the lifetime of the business leading up

to that point. That's really where
you can maximize value. It us,

the time to assess all of these 10 areas.

Make sure that business is in top shape
so that it achieves its highest value,

achieves its highest multiple, and
you have more options when you exit.

So that's really important for us,

is having that longer timeframe because
that's really where we can make much

more of a difference for our business.

So it's thinking about
it now and we don't,

we don't think about exit strategy or
exit planning as already putting that that

plan in place, you know,
for a short timeline.

It's putting it in place for the longevity
of the business so that eventually

when there is a change and there will be
changes inevitable that you're prepared

for it and you're at a
great place when it happens.

All right, that'll do it for this
episode of The Inside Via Show.

I'm Dave Lorenzo, the godfather
of growth, and she is.

Nikki G.

We'll see you back here again next
week for another edition of our show.

Until then, here's hoping you make a
great living and live a great life.