And how using the turnkey approach helps with your exit planning
How would you describe your business in terms of how it is set up TODAY in preparation for your exit?
Is it a business you have readied for your exit? If not, arguably it is a turkey.
We have a simple philosophy – whatever your position today, wherever you are on your business pathway you should have an exit plan.
Even if it is the last thing on your mind or you think leaving your business is so far in the future it just cannot register.
An exit plan makes sense on so many levels; but there is one that stands above all others: having an exit plan focuses the current owner on looking at the business from an outsider’s perspective and asking two key questions above all others:
- How do I make my business work without me – with someone else in the hot seat?
- How do I maximise the sale (exit) value?
Adapt these questions as you like, so if you are in partnership or there are multiple owners then the questions may alter slightly.
However the central factor does not change. Getting your business on a trajectory towards maximising your future sale value engenders great business disciplines today.
This is where the turnkey comes in. Wikipedia provides a useful definition of what turnkey actually means:
“A turnkey or a turnkey project (also spelled turn-key) is a type of project that is constructed so that it could be sold to any buyer as a completed product”
If we transpose the word ‘business’ for ‘project’ we can explain our point.
By making your business work on the turnkey basis you construct a business that is perfectly aligned to an efficient exit plan.
Make your business work as a business which can operate so that anyone walking through the door can pick everything up on day one and make it work. This is how the best franchisees work (and why they are so successful). They work on an operating basis, using a structured approach to making each component part of the business as efficient as possible and working in unison. Crucially this approach also takes the emphasis away from a reliance on one or more individuals.
However we have found something quite counter-intuitive in all this. You would think that the best way of doing this is to start with the turnkey approach and then work on your exit plan.
But doing it the other way round seems to work just as well; and in some ways maybe even better. Work on the exit plan first. It is the old adage “if you don’t know where you’re heading, you probably won’t get there” – in other words, by putting in place a destination you can then construct the route map.
Penguin Wealth are experts in helping individuals with forward-looking financial planning and we work in just the same with businesses and business owners. We are able to put in place long term exit plans, forward projections of how the individual entrepreneur or business owner intends to leave their business. This exercise is always instructive and, more pertinently, has immediate impact as well.
In defining the long-term plan, much is gleaned about the short term position; we find that many business people realise they have to adapt their immediate plans and working methods as a result. This is nearly always born out with a realisation they need to convert to some form of turnkey model.
The secret here is this: those who think long term actually improve their short-term positions better than those who simply think short term!