If you’re like most business owners thinking about stepping back or selling, the question you’ve probably asked is:
“Where do I start?”
It’s a fair question—and the answer isn’t about valuations, legal advice, or finding a buyer. According to Darryl Bates-Brownsword and Kevin Harrington, it all starts with a Current State Assessment.
Think of it like getting a health check for your business. Just like a coach watches an athlete’s form before suggesting improvements, this assessment tells you exactly where your business stands today – warts and all. In this episode, Darryl and Kevin walk through the areas that matter most:
???? What’s Covered in the Episode?
1. Financial Readiness
Do your financials truly reflect the health of your business? The hosts discuss how messy records, owner-adjusted salaries, and one-off costs can mislead buyers – and how to clean them up.
2. Owner Dependence
“If the business can’t run without you, it’s not worth much.” This episode explains how to reduce reliance on the founder by building systems, dashboards, and a leadership team.
3. Operational Strength
From how you generate leads to how you invoice, the episode unpacks how standardising and systemising operations boosts valuation and makes handover smoother.
4. Strategic Clarity
Is your market chasing you – or are you chasing the market? The episode explores how clear branding, positioning, and IP make your business more attractive to buyers.
5. Risk Awareness
Contracts, shareholder agreements, cyber protections – this is where many business owners get caught out. You’ll learn how to identify and plug the holes before they turn into deal-breakers.
6. Personal Financial Planning
Exiting your business also means exiting your primary source of income. Darryl and Kevin explain why aligning your personal wealth goals with your business planning is non-negotiable.
Transcription
Darryl Bates-Brownsword (00:28)
Welcome to the podcast is dedicated to helping business owners prepare for an exit so you can maximize the valuation and then exit on your terms when you’re ready. This is the exit insights podcast presented by fabric business solutions. I’m Darryl Bates-Brownsword and I’m joined by Kevin Harrington. Thanks for joining me today, Kevin.
Kevin Harrington (00:48)
Hi Darryl, how’s things?
Darryl Bates-Brownsword (00:49)
Yeah, very well. Thank you. We’re off the back of a long weekend. It’s beautiful summer here in the UK. What could possibly be wrong?
Kevin Harrington (00:58)
I did leave my umbrella somewhere, yeah.
Darryl Bates-Brownsword (01:00)
Yeah. Well, hey, look, today we’re going to have a conversation and explore one of the conversations that we, I guess, have fairly regularly talking to business owners and the other professionals who work with the business owners of privately held businesses. And that is when someone like Fabric Business Solutions comes and works with the client and they talk about maximizing the valuation of the business or making it more professional or just
getting it, even getting it exit ready or preparing it for exit, if that’s what the owners want. How is that different to how other professionals approach it? And I’m thinking of CFOs specifically who work with a business and go, well, we maximize the valuation of a business. We look at things and get them ready for exit. Isn’t that what we do? So we’re going to dig into that and explore what are the differences and ⁓ are they overlapping? Are they complementary approaches?
the same people doing the same things. What’s the difference? Let’s pick it apart. What do reckon?
Kevin Harrington (02:03)
That’s
a fine subject. And I think you kicked it off well. It’s people want to know what their business is worth. And why is that? Because the amount of money, the value of their business is something that gives them leverage while they’re trading, which is a good thing.
But most often they’re thinking about down the road when they want to sell the business, retire, sell the business and do something completely different, start a new business, whatever, they’re looking at a pot of money, which is quite substantial. And they want to know what it is, so they can build it into their planning for the future. And there are so many different ways of doing it. And so many people come along and say, this is how you should do it.
Darryl Bates-Brownsword (02:48)
Yeah. And if you’ve got an aspiration in mind, you’ve got a A lot of business owners – It’s the business is their biggest asset. And they’ve been running a profitable business for many years and they’ve been able to extract great profits out of the business. And one of the questions is why would I sell the business if I can just keep taking profits out of it and be a shareholder only? Great question. But if I were to sell it, I think I want this amount of money and
The number they have in mind is sometimes based on what they’ve seen other businesses sell for and comparing their business to those business. It could be here’s how much I think I need. I need this much to make it worthwhile for me to exit the business and move on and do something else. Or it’s just a goal. It’s a challenge number. I want to exit my business for this number. But importantly, ⁓
If they’re going to do some planning and they’re going to do some wealth management planning, some financial, personal financial planning, they need an accurate number. They need some sort of independent valuation from a buyer’s perspective of what that business realistically could be worth. Not just what the accountant’s done through their professional training and done a valuation and calculated it purely from a spreadsheet or a balance sheet, but it needs to be some sort of
valuation from that’s independently verifiable and attached to market conditions and what’s really going on and how businesses are being valued in the market in today’s terms. So, yeah, let’s let’s unpick that somewhat.
Kevin Harrington (04:32)
Yeah, okay. There’s two points in time where having a good valuation is really important. And most people are thinking about what the value is when they exit. Perhaps we could come back that in a while because that’s an amount of money that someone, your wealth advisor may well be sticking into a plan for what you’re going to retire on. And so if that’s wrong, if the exit value in three, five years time is wrong, you’ve got a big problem. The other time you need a good valuation is now.
If you want to grow and develop and evolve the business, make the value greater from your business, you’ve got to start off knowing where you are. You’ve got to absolutely know what your business is worth. And you’ve cited a couple of different methods people use. It’s what their friends sold their business for is a common one. What was the multiplier so-and-so got when they sold their tech company and so on. And so,
For the sake of this conversation, if we say a base level of business is worth ⁓ its EBITS, so profit times a multiplier. And this is where actually I find it really fascinating because the accountants, we work with the CFO center a lot, they’re crucially important in this area. Absolutely invaluable because they work with businesses and
Darryl Bates-Brownsword (05:53)
Yeah.
Kevin Harrington (05:57)
know how to work on the profit side of things pretty well. ⁓ And they know how to put the numbers together, they know how to look at the history and so forth. And they will say, well, okay, you know, if you’re trying to really show what your profit is, historic expenses you had won’t continue if someone bought the business and so on. So actually, your real profit is looking like this. And this is wonderful. They might well make your profit look 10, 20, 30 % higher than it was on an annual basis.
But for conversations you and I have with people, Daryl, that’s the first half of the equation. If… Yeah.
Darryl Bates-Brownsword (06:34)
That’s the evidence, isn’t it? That’s the,
here’s all the tangibles. Here’s all the evidence. Here’s how we can justify and substantiate that the business is what it is based on the reporting. And what do we got to report on? The most visible, tangible, touchy, feely, touchy piece is the numbers. Here’s the results of operating the business over the last X number of years.
Kevin Harrington (06:59)
Yeah, absolutely. the thing is, if someone’s looking to buy your business, the amount they’re going to pay is actually the true value of the business. That’s the point.
Darryl Bates-Brownsword (07:10)
Hopefully
that’s what they want to pay the real value of the business and what it’s worth to them compared to what it’s worth to someone else.
Kevin Harrington (07:17)
Hmm.
So what, what the balance sheets numbers and the PNL account numbers all worked into being a rejigged profit number do is they increase the profit. That’s fantastic. But but what’s this multiple thing all about? And ultimately, the multiple is looking at a number of things, really, it starts to address ⁓ intangible assets, it starts to show opportunity.
it starts to look at risk. All things that the basic numbers don’t demonstrate. But if I’m gonna buy someone’s business, I want to know about this risk stuff. I want to know about the intellectual property. I want to know about the caliber of the team. I want to know more about the sector they’re in and all those things. And all of a sudden, if a person had a one million pound profit on their business, and it goes up to 1.1 million because it’s got a bit more profit.
that’s been discovered, that’s great. But if you can tweak the multiple from four to five, that’s a huge difference, absolutely huge difference. that’s the point, isn’t it? And who would set out only work on one part of that equation? You would always set out work on both. And they are different activities. And that’s, think, the point we’re getting around to here, and why we need to work in harmony with the…
Darryl Bates-Brownsword (08:24)
And if you can do both…at the end.
Kevin Harrington (08:42)
the CFOs to enter accountants, all that community that are doing the work that’s so essential.
Darryl Bates-Brownsword (08:47)
And if we can speak in general terms, and I know there are always exceptions to the rule and my CFO buddies like pointing out the exceptions to me, but what the CFO strengths in Excel at is going, let me get all of the data. Let me have look at the data and I will tweak it and I’ll identify areas. And sometimes I’ll go, hey, look, you’re spending too much here. You’re not spending enough here. You need to fine tune that.
Here’s a whole lot of wasted money. Let’s tidy up the, just your operating, your financials so that, you know, we can cut out all the fat, you know. Now, that’s 101. That’s the first thing they did. And they probably did that, you know, when they started working with your business five years ago. You’ve now got a nice clean set of accounts and they’re going, hey, look, we need to rejig. We need to have the financial history here so that we can present it to the client. you know, they don’t have to make any adjustments to the client, the financials.
because they’re nice and clean. You you’ve cleaned out all of the superfluous items that are in the accounts and we can present them some financial, a historical set of ⁓ financial accounts to the buyer that they don’t need to do any juggling. We can show them something that they don’t have to make any adjustments. There might be some legal fees in there, but there are minimal adjustments in the accounts that they have to adjust. So they can go, if we were to buy the business,
Here’s what our accounts would look like. We don’t have to do any juggling or manipulation. There’s a good starting point. ⁓ They’ll have all of the asset registers under control. They’ll have all of the evidence. They’ll have all of the information, all of the reporting. They’ll have gathered and collated the information in ways that you haven’t even thought of and presented in a way that provides useful information that substantiates the state of the business. Brilliant. That’s exactly what you need.
That’s not stuff that a business architect or fabric would do. They want the access to that information. And if the CFO hasn’t prepared it, they’ll be asking for it. But it’s not the sort of stuff they do. So That’s why I go, hey, look, it makes A way to break it down that makes it work in my head is the CFO is brilliant at working on all the tangibles and all the data and all the reporting and all the representation and presenting of the business and substantiating it. All the tangible stuff.
What our business architect and a really good architect is brilliant at – and this is someone who’s typically got a CEO mindset rather than a CFO mindset is possibly a little more entrepreneurial, just a different approach, generally speaking, in the way they have an outlook of the business. And they’re going, okay, so the intangibles, why do people buy from me? What is it that makes my business stand out in the marketplace? How do I?
How do I get the market chasing me more than me having to spend lots of money or more money on marketing and me chasing the market? How do I change the dynamics of that equation, which means my marketing is now more efficient? And it’s a whole lot more strategy than just going, well, I’ll ⁓ change my outbound email service provider for my cold email marketing. It’s a bit more strategic than that. What’s my brand values? Why?
What’s my reputation in the marketplace? What is the, is my business big enough that it has a reputation or have I just got a reputation in my own background yard that I’ve been working with for a while? So, so these are some, some examples and there’s a whole lot more that I’m sure that you’re going to point out in a second, but these are some of the examples that that sort of thinking that sort of reputation and ⁓ market knowledge doesn’t show up on our financial records.
You know, we might get it might show up in a way that we’re because we’ve got a good reputation. That means we’re out of sell at a higher price and at a premium price, which means we’re more profitable. But unless you’re conscious, you don’t see that direct link.
Kevin Harrington (12:52)
And sometimes it’s interesting and valuable to look at the complete opposite, like just when things go wrong. And I’m not gonna go through the entire history of the retailer Homebase, but at one point they sold ⁓ for 900 million. About two years later, they sold for about 450 million. And about two years later on after that, they sold for one pound. And that was because they,
Darryl Bates-Brownsword (13:02)
Hmm.
Kevin Harrington (13:22)
were doing the wrong things. They were confusing their customers with who they were and what they were selling. They had multiple personas going on in the marketplace and it diluted their impact and so on. And effectively, it made nearly a billion pound business worth nothing. It does tend to suggest you could do the reverse.
Darryl Bates-Brownsword (13:45)
And is that, well,
before we go down the reverse, it’s an easy trap to fall into, isn’t it? Because there’s highly competent and experienced CFOs are going and CEOs are going, well, we’re really good at this. So it makes sense to extend or expand into this marketplace as well and expand into this and extend our product into that. And it seems to make sense on paper, but if it just confuses your marketplace,
⁓ And your clients, your customers get confused of who you are and what you do. Then they’re to move on to somewhere else. Is that that’s what you’re saying, isn’t it?
Kevin Harrington (14:19)
That’s exactly what did
happen in this. Who’s the big chain in Australia? it Bunnings? Yeah, so there’s a Bunnings bought home base and started trying to make it like a B &Q. And B &Q were already the absolute market leaders with distribution, presence, marketing all in place. And why is that going to work? But they only managed to change some of their stores. So it became confusing. People walking through home base fronts and seeing Bunnings inside and
And at one point, they actually said, look, we can’t make the numbers meet. So we’ll close a load of stores. Well, that probably was the right decision at the time. But that’s taking a look just at the number side of it going, we can’t afford all these rents. So we’ll close down the thing that could actually give us some income by having retail presence. So what we need to do is look at it completely around the other way. And the things you’re talking about are dead right. It’s saying what
Darryl Bates-Brownsword (15:06)
Yeah.
Kevin Harrington (15:18)
Why does the marketplace value what we do? And it’s not really because of your balance sheet. It’s not really because of your profitability. That’s a byproduct of it all.
Darryl Bates-Brownsword (15:29)
And I can probably provide a touch further insight on Bunnings because there’s a similar accent there, but they are absolutely dominant in Australia. And one of the things that they dominate, they’ve got these massive warehouses and their hardware home, home goods stores, just like a B &Q is over here. But interestingly, their positioning is they At the front of every Bunnings store, they have a sausage sizzle. And that’s basically a barbecue
Kevin Harrington (15:38)
Yep.
Darryl Bates-Brownsword (15:58)
with a sausage, not a high quality sausage and a piece of white bread and barbecued onions. And everyone goes up and buys the sausage from the sausage sizzle. And it’s something that Bunnings do culturally. Why? Because Aussies love a sausage sizzle, but B, it is always a fundraiser. It’s the local Lions Club, Rotary Clubs, RSL or which is a returned serviceman’s league in Australia. You know, so for veterans.
looking after veterans, the local netball club, the local kids sports club. They book and have to get a slot. And I understand, you know, from people there who have tried to run a sausage sizzle, you got to book a Saturday, like 12–18 months in advance. They are that popular. It is a cultural thing that every single Bunnings in Australia has a sausage sizzle out the front and everyone knows it and they’ll all go and buy a sausage for a dollar or whatever it is.
Knowing that they’re giving to helping a local community organization. And it’s just part of the positioning that Bunnings have created and had that association with the sausage sizzle. yeah, and it’s pretty good hardware store and home goods store as well. I know when they bought Homebase over here, they tried to recreate that here and in the UK, it just didn’t work. Maybe all the Aussies went up. I know all the Aussies I saw on the community networks.
Yeah, but they sold half a dozen sausages in each one. I guess it just didn’t have that cultural association for it to take off here. I don’t know if that’s part of it.
Kevin Harrington (17:31)
Yeah, so what you’re talking about there is presenting a brand in the marketplace in a way that doesn’t have resonance. so historically, you were making this much money and you start trying to do that, well, people get confused, people go away, people buy online, they find every excuse to go somewhere else. And then your marginal profits start to dive quite rapidly and you have to take heavy action to keep anywhere near afloat.
Darryl Bates-Brownsword (17:40)
Yeah.
Kevin Harrington (18:01)
So don’t do that. Let’s talk more positively about what we should be doing.
Darryl Bates-Brownsword (18:06)
100%. And do the things,
do the things that like just, I know I’m going to harp on Bunnings, but if they stopped doing the called the sausage sizzle, they’d lose a whole lot of reputation and brand value. Right. And that’s, that’s intangible. That’s, guess the point we’re trying to make it’s something intangible that creates a whole lot of value in the business.
Kevin Harrington (18:27)
And actually you get to understand the value of that and the impact of it and the danger of stopping it by understanding your marketplace by
Darryl Bates-Brownsword (18:35)
And that’s what you
mean by reverse engineering and unpacking it going backwards.
Kevin Harrington (18:38)
Yeah.
Yeah. And so understand your market. And that’s got nothing to do with all the numbers. Understand your market, what they want, and then get an overlap with what you can supply. And suddenly, there’s a business opportunity. And that’s where the growth can happen. And it’s about creating and recognizing the intellectual property you’ve got that you’ve been talking about. Is that that secret source? Is that process? It might be a particular product set, whatever it might be, and how that’s put together.
And how people, how do you get the public telling each other it’s a great place to go? We all know the damage of someone leaving a bad review. People don’t go back for five years or more if it’s a food and beverage outlet, for example. But good news can travel. And if business has got good news traveling from happy customers who are being satisfied, that increases the value of a business.
because what it is starting to indicate in a soft way is the future sustainable incomes by the loyalty and engagement of people. That’s not on the numbers anywhere, ⁓ on the tangible numbers. It’s part of that brand value. And a buyer will be looking for that. ⁓ They might not use the same terms we use, they might use different language around it all. But a buyer, when they’re looking at the multiplier, they’re saying, so okay, what could I do with this?
How can I make it even better, adding in my knowledge into that new business? Okay, well, if that’s like that, I could do this and it will grow. so to me, it’s worth a five and a half times multiplier, not a four times multiplier. And all of a sudden, we’ve got a business that is doing well today, got excellent numbers, because that’s what’s been worked on and the profit numbers are genuine and honest and clear to understand. And then it can be demonstrated.
that there are plans in place and there’s a market there that great work is being done by developing the product set, the offerings to the customer, the distribution of outlets or reach to the marketplace, whatever. All those things are happening and those don’t sit on balance sheets. Those are all about future opportunity and about scaling it and creating not income to the owners immediately. Yes, you get income from dividends, but it’s about focusing on
increasing the value of the business, which then allows you to do whatever you plan to do down the road.
Darryl Bates-Brownsword (21:11)
So how do we pull this together? If we’re going to maximize the valuation of the business, yes, you need to focus on all the tangibles, the information that supports and substantiates the journey the business has been on. And that needs to be robust. You want it to be in a state that it can’t be picked apart. And if it’s not complete and if it’s not robust, that’s going to cause concerns for buyers because if they mistrust that, they’re going to mistrust everything that’s said. So we need that.
We need to also work on the intangibles, which if I’m pulling it together, I should be in writing down, we need to focus on the problem that we solve. And that includes the product and the IP we have. We need to focus on the people and the culture and how long they stay and what’s their energy and how aligned and how effective they are in the business. We need to focus on the position and what makes us different and why people should come to our business as opposed to any other business. And we need to focus on the process.
What’s our operational efficiency and effectiveness in the business? And they’re all that, you know, may be loosely grouped into the intangibles side of the business, but they absolutely make your business work like a switch swatch and will increase. You get all those things right, you’ll have a significant impact to the valuation. And we’re not talking one or two digits of multiple increase, it can be significantly higher. And you get both sides of that equation.
the tangibles and the intangibles and you will influence the valuation, your business, the profit number and the multiplier. Why? Because by addressing all of those things, you’re going to eliminate the risks of your future cash flow once the business changes hands or once the business changes leadership, because this applies whether it’s succession or exit.
Kevin Harrington (23:02)
a wonderful summary. That is what we’re talking about. when someone comes along and looks at the business from a distance, they go, do you know what, that all makes sense to me. I’m not smelling large amounts of risk. If I take the business over, I can take it over and continue.
Darryl Bates-Brownsword (23:15)
Yeah.
Kevin Harrington (23:20)
making the profits it’s making today. And because of where I’m coming from, with my knowledge or my associated businesses, I can perhaps even leverage it further. And that’s where we want people to be with their own businesses when they’re looking to the future.
Darryl Bates-Brownsword (23:35)
Yeah, absolutely. And that’s a really important point that you raise that it’s about eliminating the risk, because once you’ve eliminated the risk, what they’re buying is a really good foundation to build on. They will they will value the business more if they can see that they can build on it with the resources that they can bring to it.
There we have it. Kevin Harrington. Thanks for sharing your exit insights with me once again today.
Kevin Harrington (24:01)
Yeah, thanks, Darryl. Talk soon.
Darryl Bates-Brownsword (24:03)
Cheers.