Are you building a business which you want to scale to a lucrative exit via trade-sale, PE backed roll-up, AIM listing, or even sponsoring an MBO?
Do you have a strong succession plan in place?
Are you laying the foundations to get your business ready?
What business owners are often surprised by is what it takes to “do this well”. A recent study showed that 80% businesses don’t sell and here are four main reasons why:
- Lack of preparation
- The business is too reliant on the founder(s)
- Poor financial reporting & metrics
- Unrealistic valuation expectations
An underlying issue for entrepreneurial-led businesses which have grown quite large is that they are often still run like a smaller business. Their systems and processes have not been developed as the company has grown.
If you want to raise capital, merge or crystallise the value of your business, it’s important to run it professionally, plan your exit, and solve and overcome the four common reasons why businesses don’t sell.
Using a standardised operating system throughout the business can enable you to do this efficiently. It helps you be ready for whatever the right choice is for you, when you want to realise the value you have created in your business.
The Entrepreneurial Operating System® dramatically improves your business processes, gets your people aligned and as a result increases the value of your business.
Whether you want to raise money, float, trade sale, or get out of the day to day, EOS helps get your business event ready – so you get what you want quicker.
When I work clients to implement EOS, my goals are to put them in control of their business, increase its value, and help them enjoy the process as much as building the company in the first place!
Case study: How EOS helped prepare Rant & Rave for an exit
How EOS helps get your business event-ready
Communicating the Vision
Mergers & Acquisition professionals read hundreds of company prospectuses, so your Information Memorandum needs to stand out, and describe your business in a professional and clear way which summarises the value you have created.
EOS helps you get crystal clear on your vision, identify why you are unique, and define your business model – and helps you articulate all this in a simple and concise way.
When you start to implement EOS, you use a Vision/Traction Organiser to define the most important questions: your core values, your core vision, your core purpose and niche.
Many businesses use this document to cut through jargon and communicate the vision and uniqueness of what they do in simple, understandable language.
Often businesses are worth less without the founder working in it.
If you want to sell your business without an earn-out or a two-three year tie-in, you need a team in place who can run it without being reliant on you as the founder being in the business day-to-day.
You need people who match your core values and who will deliver business performance at the same level.
EOS helps you get the right structure in place for the organisation to deliver the business plan and the right team in place (Right People Right Seats) within that structure, with the right skills and values match, so the business can continue to thrive and grow.
Running the business on real numbers
One of the reasons why businesses don’t sell is poor financial reporting.
If you want to get your business event ready, it needs accurate cash flow, robust financial reporting and corporate governance. It also needs a strategic accountant who can tell the story of the business through the numbers to reinforce the value.
The first step is to have a strong financial team, with a properly qualified person running the department, who can:
- make sure statutory requirements are met
- do modelling, reporting and provide a strategic overview
- work with colleagues outside the finance team to help them deliver the vision
- monitor progress and produce variance reports to determine where the company is performing against the plan
- produce reports in a timely manner so the business can make decisions based on the numbers.
EOS helps the team to develop leading indicators and measurables in order to track the business on a weekly basis and ensure it continuously performs well.
It introduces processes which provide transparency and weekly reporting in order to track what is happening, and run the business on real numbers.
Often issues can linger, days, weeks and sometimes months, which can hold the business back.
Sometimes they have no clear process in place for identifying, evaluating and making decisions which can move the business forward.
In other cases, slow decision making can be a result of the team relying on the owner/founder to make the final call. The leadership team has not been empowered to solve issues within their own department.
Most businesses need to develop the skill of making efficient and effective decisions, where everybody really focuses on identifying and solving issues.
You need a strong aligned team which can make decisions at the right level, around the vision at the right time to move the business forward.
Read more: How the EOS process works
Improving systems and processes
As businesses grow, departments evolve different methods of operating and processes are sometimes not clearly documented, therefore creating a lack of accountability.
When you can provide a way of simplifying and documenting the key processes, it brings consistency, continuity and scalability which can increase the value of your business.
Your processes and systems should be aligned and followed by all, as this:
- promotes consistent delivery of customer service and quality
- cuts out inefficiencies and extra steps, making it run smoothly
- creates a franchise model which can be duplicated, making the business scalable.
EOS helps you to name and define the core processes which your business needs to function, giving consistency and continuity, while still allowing space for creativity.
For your business to be attractive for investment or a trade-sale, it needs to show consistent performance and a detailed future growth plan. The goals of the organisation need to be prioritised with evidence the team is executing on that plan, quarter after quarter.
EOS enables you to track this performance, by introducing a regular “meeting pulse” throughout the business. This means meetings are held weekly and quarterly, and issues are identified, discussed and solved, so they lead to actions rather than avoidance.
Businesses decide to introduce an operating system for a whole range of reasons.
One of our clients used EOS to execute on their exit plan. Within 20 months they were able to:
- put the right leadership team in place
- have the right structure in each department
- continue to evolve their technology
- bring on the right long-term customers and sign contracts, making the business worth more.
At the time of the exit, the owners were able to sell for $68 million.
If you want to get your business event ready, EOS can help you understand the strengths and weaknesses of your business, help you solve any weaknesses, and make sure you match the price expectations of your business to the market.
An operating system will establish common structure, principles and practice to your business. It introduces a standard set of processes to drive forward the strategic development of the business.
Many companies find that an operating system becomes the key driver of performance and can persuade both investors and prospective employees that your business is the right one for them.