Go on Vacation … An exit strategy for small business owners

Do you plan to sell your business in 1-3 years? 3-5 years? 5-10 years? If so, here’s a simple preparedness test. Take a vacation!

Ask yourself, “What would happen to my business if I left for a 3-week vacation?”  Some scenarios:

  1. Business grinds to a halt.  Since you do most of the work yourself, when you take a vacation sales drop 50% or more.
  2. Outbound selling stops.  Like many business owners, you are the main salesperson. When you’re gone, your staff takes orders and works off existing backlog. Not disastrous, but when you return, your sales funnel is empty and future sales suffer.
  3. Most everything continues.  All company processes continue uninterrupted. You return to full email and voicemail boxes and a stack of work to catch up on. Many issues have already been handled, but there are some that only an owner can resolve.
  4. Wait, you were gone?  A savvy owner has built her business into an engine that keeps on chugging in her absence. People, processes and procedures are in place so that everything is business as usual when she is gone. (I currently have a client whose business continued to grow uninterrupted when he was out for months due to a debilitating injury.)

When buyers look at a business, they think a lot about risk. Price is one thing, but risk can be more important. Which of the above businesses is least risky to a buyer? Obviously #4. And the lower the risk the higher the earnings multiple buyers are willing to pay.

So, test your situation. Take a short vacation. What happens? Based on the results of your test, start fixing the problems. Put the processes and procedures in place so that business continues when you are gone. You may need to grow. You may need to hire. You may need to replace your spouse (who goes on those vacations with you) so that only one key person is out when you are out.

After that, take longer and longer vacations. See what happens and continue to fill the gaps.

At the very least, get your business to scenario 2, ideally 3 or 4.  In a perfect world, by the time you sell your business, you can step into retirement without a hitch. All because you started retiring earlier.

Roy Martinez can be reached at 707-781-8583 or jroymartinez@exitstrategiesgroup.com