(Newswire.net -- January 12, 2015) Reading, Berkshire -- As we go into the new year with high hopes and aspirations Trevor Wilson of Financial Power (http://FinancialPower.biz) has gone on the record with a sobering prediction.
At a recent keynote speech he was quoted as saying that less than 30% of business owners will exit with a positive financial result.
Survey after survey has shown that most business owners don’t actually exit their business, whether that be through a sale or succession.
For example, a survey carried out by ROCG, a company that specialises in business transitions, reported that 58% had no written plan.
And it's Mr Wilson's view this is going to continue in 2015.
So why such an unoptimistic view and why are so many falling short of their goal? Why is it that business owners and entrepreneurs who have created most of the wealth since WW2 are now falling at the final hurdle?
Mr Wilson commented, "Most of the plans I've seen when someone is thinking of selling a business can be summed up as a wish list. For example, they'll say things like 'When I'm 55 years old I will sell my business for X times earnings or pass it on to my son/daughter.' "
Although there is no perfect plan Mr Wilson says there are three key things the majority shareholders need to rectify if they want to create wealth on exit.
Here are the 3 common mistakes he sees business owners and entrepreneurs making...
Mistake #1 - Not Considering All The Options
Far too often entrepreneurs have a fixed or myopic view of the sale of their business in terms of how they will sell it. To ensure a business has a robust exit plan, owners should consider the impact of all options such as; a private recapitalisation with an equity group (whether that be a part majority or minority deal); a complete or partial sale to a corporate buyer; succession to a family member or member of senior management; a management buyout/stock option; an IPO (initial public offering).
Mistake #2 - Misunderstanding What Value Means To A Buyer
For most buyers the 'real value' of an acquisition isn't just about the accounts and financials. Unfortunately, most business owners and entrepreneurs misunderstand this and focus most of their attention on proving financial performance. This is why thinking in terms of certain 'multiples' can be a flawed way of thinking about the value of and the wealth that's been created in a business. For example, for certain strategic buyers, the value will be relevant to other market factors that can be much more valuable than a 'multiple of earnings' calculation.
Mistake #3 - Not having a step by step plan during the business exit
Lastly, nearly all the businesses Mr Wilson has worked with didn't have a clear understanding of the steps required and the order of those steps and tasks that would lead to a successful exit before he engaged with them. Although this is understandable, it's one of the key reasons businesses under perform at exit.
To solve this Financial Power have published an Exit Strategy Checklist anyone can download. You can download it at the link below...
At the end of the day, every business owner will exit their business, it's just a matter of when and how. Following the advice here and avoiding the three mistakes most make is essential if you don't want to become another unsuccessful statistic.
For more than 20 years, Trevor Wilson has worked with a broad range of companies and has helped owners achieve successful business exits and personal wealth.
About Financial Power
Financial Power specialises in helping business owners and management teams maximise their business exit by reducing timescales and increasing valuation.