Making profit on the business, not in the business
Every successful business owner – private or corporate – will at some stage exit their business in full or part, in some way or another.
This may take the form of a sale by a owner wanting to retire, a disposal of a non-core division by a corporation, a flotation by a serial entrepreneur, or the sale by a shareholder of their stake in a listed business. All of these scenarios are exits and all have one thing in common:
The desire to receive more money at the point of exit than has been invested into the business – This is the true definition of profit.
The vast majority of accountants will tell you that ‘profit’ is something like ‘sales less cost of sales’. At Business Reloaded we make a clear distinction between what we call ‘Margin’ (sales less cost of sales) and ‘Profit’ – which is the return achieved on exit.
We have a saying at Business Reloaded:
The P&L gets you the mortgage, the cash-flow pays the mortgage, but the exit pays off the mortgage.
This can be true for both private business owner as well as the corporate executive for whom share options and bonus agreements can be a substantial part of the remuneration package.
Are you a private business owner?
Then you would probably like to retire at some point. But how is your business – that only exists because of you – going to run without you? How do you get a good price when you’re getting little interest and silly offers? You deserve a decent return for your efforts and investment but who is going to watch your back when the advisers smell a deal?
Are you a corporate business owner?
Then you understand that you’re in it to make money when you sell. It may be that you’ve purchased the business to turnaround, or it simply doesn’t fit with the corporate strategy. Perhaps the existing management are so bogged down with the day-to-day issues that they haven’t got the time or talent to position the business for an exit?
Business Reloaded can help.
We’re not transactional Lawyers and Accountants. We’re not interested in maximising the cut we can make whilst minimising the time & effort to close the deal. Our role is to take the time needed to make the the business worth as much as possible before you go to the advisers.
We’ve prepared a brief guide to Planning, Surviving and Thriving in your Exit that will help you to understand some of the key issues including:
Why you need to be planning your exit as soon as you start, and why even a one-year lead-time can be too last-minute.
Understanding how P/E Multiples work, what drives them, and how to leverage that knowledge to make a huge step-change to the value of your business.
How to survive the emotional side of the deal including the how those people who were the biggest asset in the past can actually reduce the value of the business, and how what “the buyer is buying” is different to what “the seller is selling”.
Do not be one of the many business owners who suddenly turn up at the door to a Corporate Finance Adviser expecting an instant and lucrative deal.
Failing to plan is planning to fail!
Understanding how valuations, exit and succession plans work
Too many people fail to realise that the real end-game is to increase the value of the organisation
With this knowledge you can maximise the real profit that is made in business