Becoming a Certified Exit Planner: My Journey to Maximizing Business Value
Whether or not a business owner desires to sell his business at some point in the game, exit planning is simply good business strategy. This is why I decided to pursue the intensive Certified Exit Planning Advisor (CEPA) certification through the Exit Planning Institute. Business is truly an infinite game of continual improvement, and this new training has further enhanced my ability to unlock the value hidden in businesses for their owners. In fact, on average, 80% of a business owner’s net worth is locked in their business, and most owners can’t get it out.
The CEPA program validated that the coaching work I have been doing over the years with 80+ companies is the primary strategy to building a better, more valuable company. But the CEPA cert also added language and frameworks to business owners’ plans to see the overall journey they will go through if they ever consider exiting their company. Simply said, a healthier company, one not so dependent on the owner, is a more valuable company.
Here’s some takeaways from the CEPA program for consideration :
The Three Gates of Exit Planning
The "Three Gates" that every business must pass through for a successful exit:
Business Readiness
Personal Financial Readiness
Personal Readiness
Most owners I’d worked with were focused on the first “gate”, neglecting their personal financial planning and emotional readiness for life after exit. And did you know that a majority of owners who exit their business actually regret the decision 12 months later? This realization has changed how I coach my clients, and it opened the door to new and powerful conversations.
The Four Intangible Capitals (4C's)
80% of a business’s value is locked in these Four Intangible Capitals of that business:
Human Capital: The value of talent within the company, retention rates, right people in the right seats.
Customer Capital: The strength of customer relationships. Are they sticky? Do you have a concentration risk?
Structural Capital: The company's backend infrastructure, processes, playbooks; how the company is functionally structured.
Social Capital: The company culture that optimizes the other three capitals and gets to use their culture as a competitive advantage.
Although 80% of a company's value can be locked in these four areas, most owners never get intentional about focusing on strengthening them with the right strategies and tools and partnering with the right business coach to help them accelerate the process and avoid major landmines . Instead, many focus solely on financial metrics, which although clearly important, constitute only part of the story of a company’s value. In other words, anything that increases the risk to the acquirer lowers the value, and visa versa. So, a company can be immensely profitable, but without nailing these 4C’s, it will be perceived as too risky for anyone to buy.
It's like trying to sell a climbing expedition that promises beautiful views but the ropes are frayed, the compass is broken, the oxygen tanks are leaky, and the map is outdated. No one's going to take that risk.
And because so many companies fail to invest in these areas, the majority of these companies –over 70%– are actually not sellable. Focusing on these Four Intangible Capitals is a strong way to differentiate your company and set it up for a successful exit.
Avoiding the Entrepreneurial Achilles Heel
As I went through the rigorous CEPA certification, I realized that this exit planning framework is the critical piece of the puzzle for so many companies I've worked with over the years, lending itself to even more powerful and holistic conversations and decisions.
The entrepreneurial Achilles heel set in - the company was overly dependent on the owner's efforts. Value was getting trapped rather than building up.
With exit planning, we change all of that from day one. We create a business built to run without you as the cornerstone. It is an entity that continually grows value and gets buyers interested years before you ever want to exit. It's about taking a step back to install systems, develop leaders, diversify your customer base, document processes, and so much more.
Just like preparing to climb Kilimanjaro or Everest, you need to get personal and business affairs in order long before your final summit push. Exit planning is that vital training period where you shed old habits, get strategically fit, and apply frameworks that allow you to scale those massive peaks of success – all elements I now incorporate into my coaching for my clients.
A Holistic Approach to Exit Planning
Today, as a Certified Exit Planner, I approach business coaching with a more holistic perspective. I help my clients work ON their business, not just in it. We focus on creating transferable value from day one, regardless of when or if they plan to exit.
It's about building a company that provides the freedom and options every owner deserves, whether you want to ultimately exit or just take a break from the daily grind.
So don't wait until you're burnt out and ready to sell at any price. Let's start exit planning now and make those final summit pushes something you actually get to celebrate, rather than a desperate gasp for air after dangling off the cliff's edge. With the right plan and preparation, we can build more value in your company and make it more sellable, ultimately providing you with more freedom and options.
Remember, the best time to start planning your exit is the day you start your business. After all, it’s about you owning the business rather than the business owning you.
