Most business owners underestimate just how long it takes to prepare their business for a successful exit. In the latest episode of the Exit Insights podcast, Darryl Bates-Brownsword and Kevin Harrington unpack why the number three years keeps coming up—and what you can do to make the most of that time.
???? It’s Not Just About the Numbers
Buyers don’t just want to see your books—they want to trust them. That’s why clean, consistent financials and proper governance are non-negotiable. Kevin points out that “bad governance and bad financials drive the discount,” while well-documented systems show buyers they’re dealing with a business that’s under control.
???? Intangibles Make the Difference
Beyond the numbers, it’s the things you can’t see on a balance sheet that often push up your valuation. Think brand reputation, customer loyalty, supplier relationships, and company culture. These intangibles tell a powerful story and are often what buyers are really paying for.
Read more: From Confusion to Certainty: Why It Takes 3 Years to Get Your Business Exit-Ready????️ Why 3 Years?
It takes time to build and demonstrate change. Whether you’re launching a new brand strategy, building a methodology, or documenting systems and training, you need time to embed those changes—and prove they work.
A well-prepared business is not only easier to sell, but also more enjoyable to own.
Main Topics Covered:
- Why 3 years is the magic number for exit readiness
- Tangible vs intangible assets in business valuation
- The role of governance, documentation, and financial history
- Importance of culture and employee retention
- How IP and brand strategy increase value
Actionable Tips:
- Start documenting everything today
- Clean up your accounts—buyers want clarity
- Develop and protect your IP and brand
- Create repeatable systems that reduce reliance on you
Transcription
Darryl Bates-Brownsword (00:41)
Welcome to the podcast that’s dedicated to helping business owners prepare your business so that it’s ready for exit when you’re ready for exit. This is the Exit Insights podcast presented by Fabric. I’m Darryl Bates-Brownsword and as always, I’ve got my colleague, Kevin Harrington, joining me today. Kevin, welcome to today’s episode.
Kevin Harrington (01:02)
Hi Daryl.
Darryl Bates-Brownsword (01:04)
Hey, today, look, we’ve been having a bit of a yak recently around some of the questions that we get from people when we’re talking to them about building their business and setting it up so that it’s ready for exit when they are ready for exit. And the question that comes up often is, well, why do you guys say it takes three years? What is it you’re to do that’s going to take so long for me to get my business ready? I’ve been running my business for 20, 30, even longer years sometimes.
What are you going to do over the next three years? What do you have to do? So we thought, what a perfect topic for us to dig in today’s episode.
Kevin Harrington (01:39)
It is indeed, isn’t it? Yeah, we’ve had that so many times and Three years sounds like a, does sound like a long time, but it’s precisely that kind of horizon that gives a business owner the breathing space to move from simply running their company to preparing it for a successful life beyond their own stewardship. It’s not just about a transaction. That’s the point here. It’s about creating enduring value and stability for
the business owner, their team and their legacy et al.
Darryl Bates-Brownsword (02:12)
in. And it’s important to note that just because your business is ready for exit doesn’t mean you have to exit. Like it’s ready, You’re ready just in case there’s an unplanned exit. And you know, we often talk about unplanned exits as being those ones when, You know, if you get, you know, the owner gets hit by a bus, what happens to the business, the employees, the families and the other shareholders in that scenario?
But there’s another unplanned exit. And that’s when we get approached when we weren’t, you we didn’t have the business on the market. Sometimes we have a good business, you build a good business and someone will see your business and go, well, I’m interested in acquiring them. Let’s go make an offer. So there’s another type of unplanned exit. we’ve, we need to be ready in the case of an unplanned exit, but we also need to get ready for a planned exit.
And then having our business exit ready, whether we plan to exit or not is a good thing because it’s generally a better run business. It’s much less stress for you as the owners and it’s more enjoyable to run. ⁓ with a nice little by-product, they’re always more profitable. So there’s some good reasons why you want to consider it now. And then we started talking about, well, it’s unplanned exit, being ready for an unplanned exit and a planned exit.
So how do we look about getting a business exit ready? Well, we started to have a look at what are the factors? What is it when someone’s looking to acquire your business, they’re looking at the ongoing revenue stream. What’s the likelihood of your business continuing on the revenue, hopefully growth path, growth trajectory that it’s on once the ownership changes hands? So what are all the risks to that revenue once you leave the business? And that’s where evaluation comes on.
comes from and it’s made up of some tangible components of your business and intangible components of your business and it takes three years because you want to explore all of those things you want to have a look at all of the tangibles where the CFO will get involved and build those and get all your history and all of the intangibles which are the things that really boost the multiple of your your EBIT number that’s where you will get the valuation kicker so let’s explore and dig into those shall we a bit Kevin
Kevin Harrington (04:30)
Yeah, the three a bit I always say to people that one of the big benefits of that is you go through two complete year ends and you end up with the management accounts, the year end accounts and so forth. So the story a potential purchaser reads about your business is one of progression because it’s being tidied up from where it was. But you know, this whole preparing for exit is really a balancing act between the systems you can see.
like those clean financial and governance records and operation clarity we were talking about just there, but also the subtler assets like the culture of the business, the intellectual property, the brand reputation. And in many cases, it’s the intangibles that drive the premium a buyer is willing to pay. And it’s the bad governance and bad financials that drives the discount.
Darryl Bates-Brownsword (05:19)
Yeah.
Yeah, it’s a good way of framing it up. So why are we calling them intangibles? Because they’re not tangibly sitting on your balance sheet. You can’t see them when you’re doing your normal due diligence and looking at that story. I love the way you put that. What’s the story of the business? And all of the governance and reporting and financial reporting paints that picture and builds a story for you. And that’s why you want at least three years.
of good clean financial records. Because if your financial records aren’t clean and you go, well, yeah, look, here’s like this, but we all know that I really run the business this way. And I’m taking advantage of opportunities that are available to owners by, I don’t know, you might be running cars through your business and what have you, which is legit, but.
New owners or owners, acquirers want some clean records. They want to make sure that all of the financials are clean and all of the numbers and transactions are accounted for and clearly visible. And if there are ups and downs in your revenue and your profitability, you need to be able to explain it and you need a good, legitimate story to be able to explain it. So you’ve got to get your record keeping in place to tell the story of the journey.
And part of that is your financials and your management accounts and your financial history there. Just having all your records and your system up to date. But it’s also having minutes of your board meetings. Are you having board meetings where just the shareholders are getting together over a meal and signing things off that been prepared by your accountant? Or have you got regular board meetings in place with some external directors providing guidance and direction?
and bringing input and keeping accountability and really adding value to the growth of the business and being a real asset to your team, your leadership team and driving the business forward. So there’s the governance and the biggest weakness that we see, I think, is probably those governance and board meeting minutes, Kevin.
Kevin Harrington (07:33)
Yes, You mentioned documenting things and having records. Almost the mantra ought to be document everything, not just for the buyers, but for your own kind of clarity and peace of mind. If you’ve got things filed away, written down, you understand the things and you’ve checked them, that means you can evidence that your business is well run to that buyer. But it also means when the dialogue and the conversations are happening,
Darryl Bates-Brownsword (07:59)
Yeah.
Kevin Harrington (08:03)
with your bank manager in through routine business or with a potential buyer, you’ve got everything at the tip of your tongue. You’ve planned it, you’ve written it down, and then you can document it, you can produce the document to support it as well. It’s what, people are taking a risk on you, it’s what they want to see. They want to see you’ve got everything under control and you can prove it.
Darryl Bates-Brownsword (08:26)
Yeah. And when you talk about documentation, we’ve been talking about the governance and compliance and ⁓ financials at the moment. But obviously that extends to the systems in your business. How does work flow through your business? What’s your sales process look like? What’s your…
⁓ or a completion look like? What does your delivery look like? How do you deliver to clients what you promised them at that sales meeting? And is it always done the same way? So all of your operational systems, you may have a quality management system in place, like that needs to be documented as well, because that’s how you deliver your work and fulfill the operations of your business is the real backbone. So you need good documentation there.
Depending on the size of your business and the complexity you want to have all of your training documented as well How do you train and induct new people and bring them into the business? How do you move them through the business? How do they grow? How do they progress through the business? What’s the succession plans for each key people or just other general? Employees in your business the more you document and have a method methodology around the way your business operations work
the more valuable it’s going to be because it’s going to be low risk and consistent.
Kevin Harrington (09:41)
I was talking to a chap who works within a business. He’s not one of the directors, he’s not senior management. And their business is a tech startup, they’re about three years old, I suppose. And they’re about to sell to an American organization. And they have been now in discussion for six months. And everyone’s happy, it’s all going well. But they’ve…
Darryl Bates-Brownsword (09:58)
Mm-hmm.
Kevin Harrington (10:10)
interviewed every member of customer facing teams that exist, literally interviewed all of them, asking, “How does it work?” “What do you do?” “Why do you do it?” “If that goes wrong, what do you do?” They’ve done all the technical due diligence, they’ve done the financial due diligence, but really they’re actually diving into the cultural due diligence as well. I think part of the reason, having had that conversation, part of the reason it’s taking so long,
is they’ve had to go and discover the answers to their questions. And I really do think that six months could have been one month if that preparatory work had gone on. So there’s a business there that is happy to spend the time doing all of this because the deal’s probably gonna come off and it’s probably gonna be a good deal for both parties, which is what we wanna see. But at the same time, they’re having to have multiple people spending huge chunks of time.
for months to make this happen, which is taking a little bit of focus away from getting that, looking after customers and driving revenue.
Darryl Bates-Brownsword (11:17)
And deals go stale because they don’t move quick enough. We’ve got enough evidence of that. But the sad thing about this is every time they go through due diligence and they ask a question and the response is, well, that’s a good question. Hang on, I’ve got to go get the answer to that. A little more confidence is lost in that business because they’re going, well.
They should know the answer to that. That should be at the top of their head. Everyone in that customer facing team should be able to answer that straight away and point and give me the same answer. That’s what they’re looking for. But every time they go off, suggest there’s a risk. They haven’t got it under control. So, ⁓ let me go find the answer to that is a red flag, essentially.
Kevin Harrington (12:02)
It’s interesting, I’ve shared this story with you before, it was about me joining a big company, I won’t say who it was, but they are a household name and quite massive. And while I was being interviewed to join at a very senior level, I asked the ⁓ boss man what the staff turnover was and he couldn’t answer the question. That made me concerned. And actually I was proven right in the end, his attitude to…
caring about what was going on with staff was pretty low. And the same thing’s happening when someone comes on to try and look to acquire your business. If you don’t know these things, the chances are you don’t really care about them too much. And if you don’t care about them too much, does that mean I’m gonna have to put the business into splints and plaster of Paris for it to cure itself when I buy the business? Or is it actually gonna be okay? Well, I’m gonna have to ask some more questions.
Darryl Bates-Brownsword (12:45)
Yeah.
Kevin Harrington (13:00)
or I’m going to have to discount this by another 20, 30 % if I’m going to take that risk.
Darryl Bates-Brownsword (13:05)
And that’s just it, isn’t it? It’s just a risk. And yet how concerned am I about that risk? ⁓ a bit cautious. Well, based on that, I don’t want to pay as much for the business because I feel I’m more exposed and therefore overpaying. So we need to document everything in the business. And that’s why we we bang on about systems all the time. It’s consistent, it’s repeatable, it’s reliable.
And all we’ve been doing so far is talking about the tangible side of the business. All those things that you can see, touch, feel when you come in and have look at a business and do your first layer of due diligence. And I liked what you said there earlier, Kevin, you talked about the cultural due diligence. Let’s learn about the culture of the organization because that’s a big one. If you’ve got staff turnover and or higher than average or benchmark staff turnover for your industry.
then your staff costing is a lot higher than your competitors. Why? Because you’re having to pay to replace and recruit new staff all the time. And every time you bring someone in, it’s depending on the role, it’s three to six months before they really got their feet under the desk and are productive. So there’s another massive cost that is just eating into your profits. So good culture makes good business sense.
Kevin Harrington (14:21)
It’s interesting, isn’t it? We said this a lot of times before, but we’re talking about getting those things right with a view to exiting the business. But how about just going, it’s just good basic business practice. You’re so right. There’s virtually no job of any meaning in most of the businesses we deal with, where someone leaving and having to hire and replace them, if you look at the ebbing away of someone’s performance, having to hire someone,
The job role is empty for a while, other people are covering it, trading someone up. There’s pretty much not a single job that would be costing you less than 25,000 pounds. Even if you’re using LinkedIn to find the person you’re gonna hire, the 25,000 pounds lost, well, that’s just wrong, isn’t it? And what worries me about those things as well is how many people, if you’ve got that high staff turnover, are going around saying,
Darryl Bates-Brownsword (14:59)
Hmm.
Kevin Harrington (15:16)
neutral or negative things about you, after they spent 18 months with you and moved on because it didn’t feel right for them. And that sort of thing spreads. So we’re talking about just best practice on everything. We’re talking about run the numbers properly, run the products and marketing and sales sides of things properly, look after people in a way that they should be looked after to maximize their enjoyment and engagement and ability.
Darryl Bates-Brownsword (15:28)
Yeah.
Kevin Harrington (15:46)
deliver against your vision. You know can’t do it by ourselves, we need every member of staff to go yippee I’m part of this and why does it take three years to get a business ready to exit? Well some people have only halfway through some of these journeys and you can’t just flick a switch and make it happen.
Darryl Bates-Brownsword (16:04)
Yeah, it’s a good point and it’s one of the reasons why whenever I’m doing some desktop research on a business, I’ll always look at Glassdoor, see what the market’s saying about them. And you get some interesting insights then ⁓ and good questions to ask the owners.
Kevin Harrington (16:20)
Yes, and many a time things on Glassdoor are either hilarious or wrong, but you’re right. It’s what a buyer’s gonna do when they come to buy your business. They’re gonna flick around at these things and they’re gonna go either ask the direct question of you or they’ll, in some sort of peculiar route, they’ll get around trying to understand it. And let’s write our own story for the buyer and let’s publish it in the documentation we’ve got.
Darryl Bates-Brownsword (16:45)
That’s it.
Kevin Harrington (16:48)
and let them enjoy it and then say, do you know what? I like that so much, I want a sequel, rather than going, I doubt all the story you gave us. Let’s get it all lined up beautifully so it makes sense and it’s justifiable.
Darryl Bates-Brownsword (17:01)
Let’s own the narrative. So we’ve talked about the intangibles. Let’s get onto the intangibles, which a lot of the time, but owners say, go, yeah, this is much more fun. What are the intangibles? How do I boost those? How do I make sure I, how do I give myself the best possible chance of getting above average multiplier when it comes to my business being valued? So where do we start on that one, Kevin?
Kevin Harrington (17:30)
There’s so many places we could kick off. One of the things I would consider is pretty important, especially if we want to get it right for the exit to help maximise value is the whole issue of long term relationships and they’re kind of intangibles. So it’s having strong customer and supplier relationships that it’s all the obvious things is well documented in secure contracts, but it’s the
robust reputation as well. It’s this, if you get it right, those moments you can’t deliver exactly as your client wants. But you know what, they forgive you because they know you’ve done everything correctly on the way, it rarely happens. And when you say it’s going to be a week later, they believe you because you’re trustworthy. It’s that long term relationship that makes a difference. And the story I was talking about earlier about the business that has had six.
months of kind of due diligence going on. One of the journeys they’ve been on is talking to all the clients that deal with the top 50 % of revenue for this business. They’ve either spoken on teams or face to face with all of them. Because if I buy your business and the customers don’t want to deal with me when I’ve bought it or if I want to take over your business and all of a sudden my supply chain disappears, I’ve bought myself
a nothing business. All I’ve done is given you some money, and I’ve got nothing. So I think that is a great place to start. Because it can take quite a while to nail those things down.
Darryl Bates-Brownsword (19:10)
Yeah, so the relationships we’re talking internal, so culture, and we already mentioned culture, but culture is definitely an intangible asset. We’re talking with our suppliers, so upstream if you like, so what are our relationships like with them? Do they deliver? Do they bend over backwards to help us if we’re in a pickle? Are they long-term? Are we too dependent on one? So let’s have a look at the supplier relationships. And as you mentioned, downstream. What are the client relationships like?
It’s great having all of our clients contracted and locked in, but how many of them renew their contracts? How many of them extend? What’s that client retention like? How much do they keep coming back and buying again and again and again of their own free will when they’re not locked into a contract and they renew their contracts? So that’s the intangible side. It’s the relationship side of the business. There’s a big one.
We’re next, think we’re brand is obviously one and the amount of small business owners out there that like to think they’ve got a brand. But Kevin, this is a particular area of expertise of yours. How do you create brand value and what really is brand value? Is it just having a logo? Is it having a name and a brand ⁓ as in branding? How do you really create valuation kick out from a brand?
Kevin Harrington (20:31)
Generally, you don’t get the FD involved. And that’s a little bit unfair, of course, but some some CFOs and FDs are very marketing literate. But generally speaking, they’re the people that challenging everything you do and say you can’t do this, you can’t do that. we actually were top slicing your budget. So what
Darryl Bates-Brownsword (20:51)
So I
guess you’re alluding to some spending here that may appear to be unwarranted perhaps by producing balance in your penial.
Kevin Harrington (20:59)
Yeah, but it’s not it’s not just that
kind of direct spend where you say, can you sign off this PO because we’re going to do some advertising or whatever. It’s the staff involved in it as well. And, you know, it’s an absolute fact that businesses that market through recession and difficult times, ⁓ end up overtaking or growing the gap between them and their competitors when we come out of those times.
It’s a fundamental part. It’s part of the fuel for the business marketing. And we talk about branding and for some people that’s pretty much it. And they go, if we just make the logo bigger and spend 50,000 pounds doing a rebrand project, the job’s done. But it’s not about that. The reality is that a brand, a great brand, the benefit to you is that people will ask you less questions when they’re buying your product.
because you’ve earned the right, you’ve earned the trust. Over time, we’ve always done things in a consistent way with your marketplace. And if you introduce something new, people are going, I’m looking forward to this, rather than going, no, here we go again, what’s going to happen this time? So it’s very much an overarching thing where those businesses that do that well, they talk to their customers, they investigate their competition, they listen to the marketplace.
And they end up understanding what’s going on outside the business, generally better than any other team in the business. So marketing in a business becomes the sensors for what’s going on in the world, and then what marketing will do depending how it’s structured. Marketing are then proposing what products and services should be there. And they’re doing it on behalf of the customers, their understanding.
They’re not doing yippee, I’ve got a good idea to launch a new market. And no one’s ever thought of this one before. They’re understanding a need, they’re understanding a problem it might solve or whatever. And then all the visual identity that goes around it, because after all, that’s where the word branding comes from, it’s from branding cattle, right? It’s where it came from originally. All that branding work, people recognize that brand and have more trust in them. And it is exceptionally well spent money.
And I would argue that if you want to get it right, you have an efficient and effective marketing team, quite small, but you make sure your entire organization understands what you’re trying to achieve so that they all become ambassadors to the outside world.
Darryl Bates-Brownsword (23:40)
As you’re speaking there, I was listening and processing it and it came to mind, would it be a fair summary to say if you’ve got a good brand and the market knows and understands your brand that the market comes to you and if you don’t have such a good, well-known reputable brand, then you’re chasing the market. Is that a fair, but maybe clumsy summary?
Kevin Harrington (24:01)
It’s a perfectly acceptable one. It’s one of the many ways of summarizing it. sounds too simple, but it’s true. And we see it time and time again in retail markets. mean, most of our clients have professional services and B2B environments and so on, but we do deal with people that are in retail as well. But you see it time and time again. It’s hard work if you’re an unknown brand ⁓ or a brand that has let people down.
because the branding is reminding people how bad it is sometimes. That’s bad food, that’s their bad clothes, it’s got that brand on it. But people will get excited about when something new drops in a shop and people queue up for it because they know it’s what they’re looking for. And I’m not saying we’re trying to mimic all those things, but we want our business development, sales people, whatever you want to call them.
Darryl Bates-Brownsword (24:35)
Hmm.
Kevin Harrington (24:57)
We want them to be the person that our businesses customers are excited to hear from, that look forward to hearing from them because they’re kind of bought into the ambition of the supplier, your business, and where they’re heading.
Darryl Bates-Brownsword (25:15)
Yeah, so it’s one of those things, isn’t And it’s definitely an intangible and you might be able to pay for it. And if you’re buying a brand from someone, then it gets added to your balance sheet. But in the meantime, it’s one of those things that is such an incredible valuable piece to your business. And if you’ve got a brand where it is known, you can generally charge a premium for your product.
And again, increasing your profitability, increasing your valuation. So a nice piece there.
Kevin Harrington (25:46)
One of the funny things is
that to get that started, like most things we’re talking about, to get started on that project, you need to benchmark it, or you need to find where your kind of ground zero is on it. And the people that should most do it, most hate it. So the people that have gotten probably the worst brand image, they kind of go, oh, we’re gonna be touching that. Whereas the businesses that are flying, you making more margin everyone else, getting higher market share than you’d expect and all those things.
happy to do it. Now the people that don’t do it, they’re afraid they’re to find out something horrid. Well, wouldn’t it be great to find out exactly what’s being said, so you can put it put it right, and start increasing your margin by 123 % by getting your business channel partners to carry more of your stock represent you better, whatever it might be. It’s a really quick win thing. And it
Darryl Bates-Brownsword (26:25)
Mmm.
Kevin Harrington (26:43)
Sometimes if it feels difficult, just get someone to help you because there are simple methods of getting good quality results from the marketplace about how you were seen.
Darryl Bates-Brownsword (26:51)
Yeah.
And I guess it takes total dedication and commitment to really leverage it, especially in a service-based business.
Kevin Harrington (27:02)
Yes, yeah, it totally does. Yeah, it’s, I think that the problem is though that most professional services businesses sit down and come up with what they think they’re to tell people and it’s ends up all being remarkably similar to every other professional services business. And they think they’ve got it right, but they haven’t been doing the listening in the marketplace.
Darryl Bates-Brownsword (27:05)
get that consistency.
Kevin Harrington (27:29)
They haven’t been witnessing what everyone else is saying. just, you know, come to us, we listen, come to us, we care. All those sort of messages. We’ve been established for 100 years, all those things. You kind of go, well, so what? Why does that mean you can help me? Yeah. And get out there and find out what people want and tailor that message for them. You’ve probably got what they want already, but let’s understand it and fine tune it so you can talk to them. And similar businesses.
Darryl Bates-Brownsword (27:43)
Show me, don’t tell me.
Kevin Harrington (27:59)
and the business grows. But you know, we’re talking about exiting your business. Why does this matter there? It matters because when the prospective buyer comes in, you can say, this is our strategy and vision around this area. What we’re doing is we know it’s not dead right at the moment, there’s a pot of gold to be won though, which either we’re going to make then you’ll buy the business or you can buy the business at a small premium and you can carry on growing it. What you’re showing is potential for the business and you know there’s potential.
So why would you not do that?
Darryl Bates-Brownsword (28:33)
So that’s your favorite intangible asset. Now let’s talk about mine.
Kevin Harrington (28:37)
Okay, far away.
Darryl Bates-Brownsword (28:40)
So it’s obviously IP. Like I love it when, especially with working with service organizations where you help them move away from selling time. And when we talked about systems and methodologies previously, what if you had some modeling that demonstrates or captures or articulates your methodology? And that’s your IP that represents your methodology in terms that talks about or shows the value to your client.
Now, wouldn’t you love to be known for that and using that IP for solving your clients problems and therefore selling solutions rather than just selling your time and expertise to solve the problem, which you haven’t really articulated to the client that well. Now, that’s when you become known for that methodology or that IP that represents your methodology. And even best practice is when that methodology or that IP is reflected in your brand imagery.
To me, that’s the gold standard. That’s when your known clients are coming to you because you’re known for your methodology and they want your methodology to solve their problem because they’ve learned and they’re aware that your methodology will solve their problem and it’s reliable. So that’s what I’m referring to when I talk about IP. And you’ve got the old school or the traditional IP, which is patents and protection and what have you as well.
But I’m talking about this intangible, if you like, IP that it’s not licensed necessarily. Could be, I guess, like ⁓ on some of them out there, the franchises. But when people buy your methodology, that’s what I get excited about and moving away from selling time.
Kevin Harrington (30:24)
Yeah, so if you’re thinking of exiting your business and you’ve got intellectual property of the type you’re describing there, Daryl, what’s going to happen? The potential buyer might sense it in the marketplace and might be aware of it. So if first thing is if you’ve got it, it might be the thing that introduces the conversation. And it is a whole lot nicer what someone knocking on your door, and then you saying, well, I wasn’t thinking of selling, but if you’re offering the right place, rather than having to go out with your begging bot.
Darryl Bates-Brownsword (30:44)
Yeah.
Kevin Harrington (30:54)
But actually, the other end of this is if you’re not familiar with your intellectual property, and you’ve probably got some most most businesses have got something that we would class, as you’ve just described it as intellectual property, you’ve got something extra to sell. So let’s put it on the list of assets that someone is buying. It might not sit on the balance sheet, but
you’re telling people that if you buy this business, you’re getting that intellectual property. So you have to be able to frame it up what it is, you have to be clear about how it works and how it benefits. And it has to be identifiably be transferred to the new owner. And because then they’re getting something, they’re going, this is great, I hadn’t seen this, it’s gonna reduce my risk of running this business, it’s got true value.
Darryl Bates-Brownsword (31:44)
Yeah.
So if you’re a business owner and you’re listening to this and you’re thinking, well, let’s go back to the three years question. If you’re thinking, hey, that IP piece sounds really interesting to me and you want to move away from selling time, which means your business is dependent on the people delivering with that time and you want to de-risk it by becoming known for your methodology.
That’s a three year journey, developing the methodology and then developing your systems and processes. So you’re selling the methodology, learning a new pitch so that you’re selling the methodology rather than time and having that flow through that all of your clients, all of your business is now based on this methodology approach rather than time based approach. Driving that through and demonstrating that you’re more profitable as a result of it is going to take at least three years.
Now once you’ve got that in place, you’ve got a nice little kicker to your business. Very similar if you want to drive a brand strategy. You need to demonstrate that the initiatives you put in place and you become known for your brand, it’s going to take a couple of years. Tidying up your accounts to get that three years history. Buyers looking for three to five years. If you’ve got a bit of a story there that’s showing a story with three years of clean accounts.
Yeah, there’s three years there. If you’re bringing in new ideas and initiating new projects, it takes a year to build the project, a year to demonstrate that it works and ⁓ brings additional profit to your business. And then you want a second year in there showing that you’ve got a kicker and you’ve been able to leverage that initiative in your business. So
To pull it all together, these are the reasons that we say, and sometimes it just may sound flippant and roll off the tongue, but these are the reasons, hopefully I’ve shared some ideas, to help you understand why it takes three years before your business is going to be exit ready. Again, you don’t have to exit if you don’t want to, but let’s get your business so that you could exit quick and easy if you wanted to.
and not have to take six months going through due diligence or 12 months as I’ve even heard, ⁓ because you have to keep going to find the answers to the questions. And every time you do that, you’re just increasing the risk to the buyer.
Kevin Harrington (34:00)
Wise words, Daryl. And you know, so often, people think they can change the world in three months. And it rarely happens. But three years, you can you can do a lot of very good work. And the value of having done it properly pays itself back. And if people want to see how we do that, well, you know, we can show them the type of implementation plans we use and so forth. Bear in mind, you know, if you want to get
Darryl Bates-Brownsword (34:19)
Absolutely.
Kevin Harrington (34:29)
exit ready, you still need to be running your business. So you got you end up with sort of one and a half jobs while you’re going through this and three years is a beautiful length of time to make real valuable difference.
Darryl Bates-Brownsword (34:41)
Kevin, once again, thanks for sharing your exit insights with us today.
Kevin Harrington (34:47)
Thanks, Daryl.