Sunday, July 15, 2007

What I wish someone had told me starting out

Probably the one thing that I wish someone had said to me before I had started my own business was “... yeah, that's all great but how are you going to get OUT of the business ?”. In simply terms, what is your exit strategy ? My exit strategy ? You must be joking, I would have said, I want to do this for the rest of my life. Hmmm...that is all well and good but working in your own business for the rest of your life is only one possible scenario. So many OTHER things things could happen along the way that may cause this to change.

Don't get me wrong, I still want to work in my business for the rest of my life BUT what happens if I don't ? What happens if my circumstances change and I need to get out ? What's is my strategy ? If I try and sell my business would I get the value that I have invested in it ? Probably not. A great book that deals with this issue is the E-myth by Michael Gerber. He basically says, what do you have if you can't take holidays when you like, when you can't afford to have a day sick and you are always behind on your work ? You don't have a business you have a job! Which is exactly the thing that most people who start a business are trying to get away from !

It wasn't until I read Gerber's book that I realized that I didn't have an exit strategy. Again, not because I needed one but because it provided me with options. When I started to look closely at my business, through a buyers eyes, I realized that the business didn't have nearly as much value assocaited with as I thought. A good example of this was my accounts. I had done all my accounts in a spreadsheet that I designed myself. I worked really well, was flexible and I knew the in's and out's but if someone from the outside looked at it they would say it wasn't standard and they would want something like Quicken. D'Oh how stupid of me. I'd made that part of my business unattractive to a potential buyer and therefore destroyed value.

When I started looking at the business as a whole through a buyer's eye I realised that my accounts weren't the only place where I'd been destroying value. Every where I looked I had custom one off systems, lacking documentation and procedure. It wasn't that the business didn't function successfully, the problem was all the best bits where in my head. That is all well and good until you try and exit the business. You can't simply dump your brain into the new owner's and move on.

Now I had to start the long ( and still on going ) process of getting everything out of my head and down on paper. I am now constantly working to add value to my business for a potential buyer. I can tell you that it is a right pain in the butt and I wish that someone had made me think about my exit strategy before I got into my own business. So take heed from me. If you are planning to go into business for yourself, plan an exit strategy first, even if you never need it, it is always reassuring to have.