Exit readiness

Four priorities, in order

1. 1

   Document the recurring base

   Which work is contracted, at what frequency, at what price, and renewing at what rate. Businesses that can answer that in a schedule receive credit for it. Those that cannot are paid for one-off work instead, which is worth considerably less.

2. 2

   Measure customer concentration

   Determine what your largest customers represent as a share of revenue. If the figure is uncomfortable, that is a reason to begin now rather than a reason to avoid the question. It takes time to remedy and no time at all for a buyer to identify.

3. 3

   Document the operations

   Move the business out of the owner's head and into written procedures: how work is scheduled, dispatched, performed, checked and billed. Addressed below, because it is the element for which buyers pay the clearest premium.

4. 4

   Establish a verifiable market presence

   Addressed below. Usually the least expensive of the four and reliably the most neglected.

Standard operating procedures

In most independent trade businesses, the operating manual is the owner. How jobs are quoted, which technician is assigned to which type of call, what the inspection route is, when a deficiency becomes a repair order, who calls the customer whose renewal has lapsed: it works, but it works because the owner is standing in the middle of it. A buyer prices that precisely as it deserves: as risk.

The published data here is unusually clear. The Value Builder System, from its analysis of the more than 80,000 businesses that have completed its assessment, reports that companies able to operate without their owner were valued at around 4.5 times pre-tax profit, against roughly 2.9 times for businesses in which every decision routes through the person selling. Same revenue, same trade, materially different price, and the difference is documentation and delegation. The dataset and method are theirs, not ours, but the direction is consistent with what buyers in our trades say and do.

Source: The Value Builder System, published analysis of 80,000+ completed assessments. Figures are their reported averages across industries, not a valuation of any specific business.

We therefore run process documentation as a defined service within exit readiness. We interview you and the key members of your team individually, one process at a time, with the people who actually run each function. We audit how the work is actually performed rather than how a dated manual says it is performed: scheduling, dispatch, the inspection workflow, deficiency to repair to invoice, licensing and renewals, collections. We then produce a set of standard operating procedures from which a new owner could run the business, and which a buyer can read in diligence as evidence that the business is a system rather than a personality.

• It does not signal a sale. Process documentation is ordinary good management, and your team experiences it as exactly that. Nothing in the work requires disclosing that an exit is under consideration.
• It shortens the transition period. A buyer who can run the business from the manual requires less of your time after closing, and in a licensed trade the manual is where the license-holder question is answered in writing rather than under pressure.
• It pays even if you never sell. A documented business is easier to staff, easier to step away from, and easier to hand to a manager. The exit value is the additional return.

A verifiable market presence

Independent trade businesses are, as a rule, difficult to locate and verify online, and the pattern holds across every trade we have measured. In fire and life safety, the market we have mapped most thoroughly, fewer than a third of independent Gulf Coast firms had a website that could be located and verified as theirs, and among those that did, the median search authority was effectively zero.

Two consequences follow. The business loses inbound work it never learns of, to competitors who are not better but are simply easier to find. And a buyer reviewing a business whose customers all arrived through one owner’s personal relationships sees key-person risk, and prices it accordingly.

This is unusually correctable. In a trade where the median competitor is invisible, being merely present is a durable advantage, not because search is sophisticated, but because almost no one in these industries has addressed it.

Engagement structure and fees

The same program at two levels of involvement, depending on how much of the work your own team can carry:

Both engagements run three to twelve months depending on the starting position of the business, are scoped in the first working session, and may be concluded at any time. Every dollar paid is credited in full against our success fee if we later conduct your sale, so for an owner who sells through the firm the readiness work carries no incremental cost.

A subsequent sale through the firm is a separate engagement under a separate agreement. We will state plainly if we believe the readiness work is not worth undertaking, which occurs: some businesses should go to market as they are.

When this engagement is not appropriate

• You intend to sell this quarter. There is insufficient time for any of the work to be reflected in the financials.
• You have no intention of selling and the business operates well. In that case this is discretionary expenditure, and it should be evaluated as such.
• A serious offer has already been received. The offer should be evaluated first.