Just like a pre-nuptial agreement, a well defined exit strategy for any business is both uncomfortable to plan and appreciated only after-the-fact. But unlike a pre-nup, having a plan for what will happen to your business when you are no longer the one running it can make a huge difference how you run it in the meantime.
Many business owners and entrepreneurs are so focused on the here and now that they postpone thinking about how the business (a.k.a. their baby) may end. Yet, just like most things in life, when you have a goal or end-point in mind, it makes getting there easier. While selling your business may be the assumed nirvana, the reality is that most spas and salons are simply closed without a buyer. In today's economy, that is is easily understandable. However, two or even five years ago, it was still challenging to find a buyer for spas. Those skincare, massage or spa businesses that do find buyers have a few things in common:
- Profitability. This really is the number one thing buyers consider and the sale price is based upon. A very simple, very generic asking price of most businesses for sale (regardless of industry) is annual profits times two. If the business is not profitable, it will be challenging to set a high sales price that buyers will be interested in.
- Standard operating procedures. Do all your employees have an employee manual that lists procedures for every aspect of the business? From morning open and evening close, to how the phone should be answered, to signature technique and touches in the treatment room, everything about your business should be documented. Michael Gerber's book, E-Myth Revisited:Why Small Businesses Fail
, does a fabulous job at explaining why and how to start documenting roles, job descriptions and operating procedures.
- Loyal and long time clients. While this may seem to be an obvious need when selling a business, proof of loyalty is important. What percentage of your clients return on a regular schedule (monthly or every six weeks)? How many new referrals have you received from clients? How often do you reach out to promote new services, employees, or special offers? Well kept client records can provide insights on the performance of the business that nothing else can. Don't wait to calculate how frequently clients on average visit for skincare until you are ready to retire. Find out now and then brainstorm a way to reduce the average from 7.8 weeks to 4 now so you can reap the rewards.
Even if the thought of closing up shop, retiring or selling is very far off, adopt the mindset of running the business as if you were preparing to sell it tomorrow. This shift will uncover ways to be more efficient, expose opportunities to be more consistent in handling clients and help focus the direction of the business. Perhaps it will lead to other strategies like opening more locations or reducing the number of services you offer.
Having a plan for transitioning your business into one you are no longer running, will shine new light on ways to be more successful today.
Comments