Perhaps our biggest takeaway is a shift from Boomer owners who often have a singular passion for their business to Gen X, Millennials, and Gen Z who often see their business as one of many life passions.

What could this generational shift in private business ownership mean for your business?

How prepared are you for the future state of your business? How ready is your business to transfer to a new owner? Regardless of the option that best suits you and your business, you’ll likely need to spend a lot of time seeking out information and guidance on the process. When the initial study was done in 2013, less than 40% of all owners surveyed said that they had an understanding of their exit options. In 2023, that number rose to 70%.

The intention during our Exit Audit is to learn the story of your business over the course of interviewing those that built it or have become essential in running it.

Hearing the stories of how it came to be, the factors that cause customers to remain loyal, and the plans for the future.

How did you get to where you are today and how will you reach those future goals you have plans for? That’s what we get to discuss.

The interview portion isn’t an interrogation, it’s a conversation. A conversation that allows us to paint a vibrant picture of your company and its potential.

So much of the value in your business is built on the qualitative data we learn about in the interviews.

You know the days where you’re constantly spinning your wheels? By the end of the day nothing is solved, but you’re exhausted. Your “issues” pile keeps growing as problems are coming in faster than you can find solutions. The brute force method worked when you started your business. But two things have happened. Your business has grown and you’ve gotten older. You cannot keep up the pace anymore. And you’ve earned the right to slow down and enjoy what you’ve built.

The answer is simple, and even a little boring – Systems.

Remember that incredible business trip you took to Italy last year? No doubt, it was a work trip. You did indeed conduct business. But just between us, did you need to try all the wines with your clients that day? Did you need to go for two full weeks instead of three business days? No criticism implied; the ability to expense things is one of the great perks of owning a business. But when you’re ready to exit your business, suddenly all these extra expenses can work against you. That’s because the valuation of your company is based on a key metric many people have never heard of: your EBITDA.

Starting small now will inevitably lead to exponential changes in the value of your business in the future. Warren Buffett did not wake up in his 50s and decide he would be rich. He started making small decisions as a young boy and these accumulated into his financial success in his 50s. An Exit Audit creates a road map of the things you can start doing today, without interrupting everything you’ve got going on.

If you feel uneducated and unconfident about your business’s valuation, join the club. You are a business owner, not a business transactions specialist.

While anecdotes can serve as legitimate inputs to establishing the value of your firm, let’s learn about how buyer’s approach value in today’s marketplace.

EBITDA is an acronym for Earnings Before Interest, (Income) Taxes, Depreciation, and Amortization. You won’t find it listed on standard company financial statements, but you can calculate it from them. EBITDA is a very rough calculation of the cash flow generated by your business operations.

When it comes to selling debt or equity in your business it’s important to note that EBITDA comes in many flavors and will be a critical metric in any discussion.

It’s your business and you’ve always managed it this way. You’ve gotten a certain glee out of minimizing your income taxes. Over the years you’ve employed two common “strategies'' of closely held business owners: under-reporting cash sales and classifying personal expenses as business expenses.

While these actions are illegal under US law, you’ve dealt with that moral conflict long ago in your head. Either way, this piece is not about the legal, ethical, or moral questions of such strategies. Let’s instead discuss how these strategies may impact your exit plan.

Gone are the days when you knew everything going on in your company. Your free-flowing team meetings are getting increasingly chaotic. Everyone talks about how well everything is going in their department, relying on stories and anecdotes. Yet you know profit margins have been slipping for consecutive quarters. Something is wrong, but you cannot put your finger on it.

You’ve heard it said that “words matter”. As a business owner you might be surprised about how words can attract or repel potential buyers for your business. Let’s take a look at a few real world examples to get a sense of what we mean.

Goodwill is an accounting concept that arises in business sales. You would only know about it if you ever took an accounting course or bought/sold a business. While the technical accounting for goodwill is not important for our purposes, the concept is critical for your understanding as a business owner planning to exit.

You can sense the email arriving any moment from your finance director. The subject line will read: “Discuss Next Year’s Budget”. You think, “Is there anything more corporate than a budget?!” Budgeting makes you anxious and has for years.

You wouldn’t even do it if it weren’t a requirement from the bank. This is the moment in every year where you are forced to make definitive statements about the future and put yourself in a box. You do not like being put into a box. You are an outside of the box kind of person.

When it comes to the sale of your business, the most prized assets are the ones that have the highest potential to generate recurring future cash flow for the new owners. So the key to a successful business sale is not historical or present cash flow, but transferable future cash flow.