S5E3 The 5 Key steps for selling your business With Darryl Bates-Brownsword

S5E3 – The 5 Key steps for selling your business With Darryl Bates-Brownsword
The 5 Key steps for selling your business. Did you know that 80% of business deals fall through? In other words, 80% of business owners who try to sell their business, do NOT have a successful exit. Are you a business owner looking to sell your business someday? If the answer is YES, then It’s essential to start preparing for your exit well in advance to ensure a smooth transition and maximize the value of your business. By following a structured approach and focusing on key areas, you can increase the attractiveness of your business to potential buyers and ensure a smooth transition when the time comes to exit. In this episode of the Payback Time podcast, show host Sean Tepper sits down with a mechanical engineering and management consultant who has a passion for helping small and mid-size business owners successfully sell their businesses. Darryl Bates-Brownsword the founder of Succession Plus explores the steps you can take to get your business exit-ready, with a focus on strategic planning, systemizing processes, and building value for potential buyers.

Key Stages for Successful Business Exit

Darryl discusses the five key stages that business owners need to go through for a successful exit. He emphasizes the importance of proper preparation for selling a business to maximize valuation and ensure a smooth exit process.

Lessons Learned and Mistakes Made

Darryl reflects on a past business experience where he and his team struggled to scale the business effectively. He acknowledges the mistake of not walking away sooner and emphasizes the importance of recognizing when a business is not fulfilling its potential.

Importance of Systems Thinking

Darryl explains his approach to implementing systems thinking and methodologies in businesses, particularly focusing on marketing efficiency and measurable results. He stresses the need for structured processes to achieve predictable outcomes.

Launch of Succession Plus

Darryl introduces Succession Plus, a business dedicated to helping business owners prepare for successful exits. The company offers a 21-step program to guide owners in maximizing their business value and planning for a smooth exit.

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Reasons Why Business Deals fail to materialize

Darryl discusses why many business deals fail to materialize, attributing it to business owners’ tendencies to micromanage and lack of delegation. He emphasizes the importance of building a capable management team for business success.

Five Stages of a Successful Business Exit Preparation

Darryl outlines the five stages of preparing a business for a successful exit: Identifying value, protecting assets, maximizing valuation, extracting value, and managing post-exit finances for long-term wealth preservation.

Timeline for Exit Preparation

Darryl provides insights into the timeline required for exit preparation, highlighting the need for different timeframes for enhancing profit versus working on intangible assets and multiple factors that influence business valuation.

Advice for Entrepreneurs

Darryl advises entrepreneurs to start preparing for their business exit early, emphasizing the benefits of having an exit-ready business that is more profitable and easier to run. He stresses the importance of planning ahead for long-term success.

Best and Worst Advice Received

Darryl recalls being advised to just “work harder” as the worst advice and praises the advice on consistent and deliberate activity to achieve results as the best advice he has received.

Key Timecodes

  • (00:59) – Show intro and background history
  • (04:22) – Some lessons learned on his journey
  • (07:30) – Deeper into his background history and business model
  • (09:37) – Understanding his business strategies
  • (11:53) – Why business owners fail
  • (17:21) – Deeper into his business tactics
  • (21:21) – Understanding his business selling strategies
  • (32:09) – A key takeaway from the guest
  • (39:22) – Guest contacts


[00:00:00.000] – Show Intro
Introducing Payback Time, the podcast for entrepreneurs looking to build and scale their start-ups, gain access to actionable tips, proven strategies, and valuable data that can help you avoid mistakes, skyrocket sales, and optimize profits. Your business breakthrough may just be an episode away.
[00:00:18.550] – Guest Intro
Did you know that 80% of business deals fall through? Specifically, 80% of the time that business owners are trying to sell their business, the deal goes south. This is a bad place to be if you on selling your business someday. While my next guest has a background in mechanical engineering and management consulting, but he found a passion for serving small and mid-size business owners, specifically helping them sell their business successfully. In this episode, he talks about five key stages a business owner needs to go through in order to have a successful exit. If you’re a business owner who’s looking to sell your business someday, you do not want to miss this episode. Please welcome Darryl Bates-Brownsword.
[00:01:00.460] – Sean
Darryl, welcome to the show.
[00:01:01.320] –  Darryl
Hey, thanks for having me, Sean. I’m looking forward to this one. Given a little bit of prep, I’m a little nervous with some of these questions. I think I’ll be fired my way.
[00:01:10.930] – Sean
You’ll do great, but I always like to start it off with a fun one. So why Could you tell us something that most people don’t know about you?
[00:01:18.620] –  Darryl
Look, what most people don’t know about me, as soon as I open my mouth, they realize that I’m an Aussie, I’m living in the UK. But I met Prince Charles as a kid when I was about 11 years old and living in Papua New Guinea. And as a young boy scout there, got to shake his hand. And that was something that I’ve been able to share at dinner parties once or twice since. But-15 minutes of fame. That’s the most exciting thing. Yeah, 15 minutes, about 15 nanoseconds, I think. That’s the best I could come up with on short notice.
[00:01:55.920] – Sean
That’s awesome. Thanks for sharing. All right, well, let’s dive into your background. Why don’t you talk about your background here? We’ll lead up to what you’re working on today.
[00:02:04.180] –  Darryl
So background is I’m actually a mechanical engineer. I love understanding how things work. And growing up, I guess I was a late bloomer and trying to figure out what I was going to do. And I was pretty good at maths and sciences, so very logical, systematic, structured mind, which on the flip side is I can be direct and blunt at times. So Mechanical engineering, and I worked in the power industry, so working on power stations, thermal power stations. And the industry went through a lot of change. And I saw all these consultants coming in, and I saw the consultants, I thought, That looked like good work. I was always intrigued by business and the way business worked. I went off and studied and did a business degree and ended up getting into consulting. Then where I lived, it was just general management consulting to corporates. I was I was just another player with the company I was with another player doing anything for anyone type of thing, gun for hire as a consultant. And I focused because I did engineering, when I did my business, I focused on marketing and finance, the two areas where I was weak in.
[00:03:14.940] –  Darryl
When I was doing the marketing, I said to the guys, I really think we should be focusing on SMEs, small to medium enterprises, because all of the knowledge we have is the same in the corporate world. But when you apply that knowledge to the SME, it’s revolutionary. It’s brand new information to them. And the company said, Yeah, that won’t work. We can’t make any money out of SMEs. You don’t know what you’re talking about. I was 31, I think, so young and dumb and still naive enough to think I could change the world. So I said, Well, I don’t want to die wondering. I said to my wife, Give me a year. If I can’t make it work, I’ll go get a real job. And I’ve been working with SMEs ever since and absolutely love it. I couldn’t see doing anything else, helping them grow, helping them change the way they look at the world and look at the way they’re running at the business to give them more time, more money, and more freedom, really. So there’s a bit of a real fast overview of my business.
[00:04:23.870] – Sean
I appreciate your background there, going from the corporate focus, the enterprise level, management consultant consulting, making that transition to the SMEs, or sometimes I hear people say SMBs, your small, medium-sized businesses. So that’s great. We’re going to dive into what your business does here in a moment and talk about, hey, what can people do to prepare for an exit? But last time we talked, I think it was maybe two weeks ago, you were sharing maybe some lessons learned or mistakes made. And we always like, as entrepreneurs, we want to avoid those same mistakes. So why don’t you share us one of those lessons learned on your journey?
[00:04:59.910] –  Darryl
Well, I’m not going to say doing engineering was a mistake, even though I worked in engineering for about 10 years and I loved it, but I wasn’t very good at it. I wasn’t good at getting into the nitty-gritty. So that was career two, I guess. What I didn’t mention is career one is I worked in a bike shop, loved bikes, and I needed to get that out of my system before I went to Uni. So I worked in a bike shop for a few years and still love bikes and riding bikes, push bikes, bicycles today. But I think the big… The mistake that I guess, and you can see I’m stumbling because I don’t like talking about it, but the mistake that comes to mind is I was involved in a business that it felt very exciting. We had a number of really energetic guys together. It was in the early 2000s, and we started a business where we said, Look, what we need to do is we’ve got this methodology approach, and we want to take it to SME, to businesses, and it’s a methodology. So We want to sell the methodology. We don’t want to sell the person.
[00:06:03.600] –  Darryl
And we see an opportunity to scale this business. If we teach other people how to do it, we can scale this business and we can franchise it, but create a license model. And as the business grew, the key players, it just kept drifting and drifting and drifting, and it never fulfilled its promise. And the big mistake that I see now is looking on, while I have no regrets of being involved in that business, I should have walked away many years sooner than I did and moved on and realized that the value alignment, the full proposition just wasn’t meeting its potential. And what I mean by that, it’s the classic story. If you have a look, the cobbler shoes always need re-souling. We didn’t practice what we preached. We didn’t fully do the marketing as we’re selling people do. We didn’t follow our own methodologies as much as we could. And And that weakness just held the business back. So, look, I should have left that business a long time earlier than I did. And it was the allure, the promise of getting big and exiting and this magic fantasy payday, which just didn’t eventuate. It’s all been a good grounding for setting me up and giving me the experience that I needed to start the business that I’m involved in today.
[00:07:29.980] – Sean
Yes. So just to highlight, I’ve seen what you’re talking about a lot. I was actually in that position. I had an agency in the late 2000s and could not practice what we preach because we’re always selling, bringing projects in, completing them and getting out the door. And it’s like, we were really bad at marketing and sales systems. Yet there was a coaching element there with the businesses we’d serve on what to do. It’s like, we’re not able to do this in our own business. This is always hunting for more work to even survive. It was…
[00:08:02.200] –  Darryl
Too as I say, not as I do.
[00:08:04.070] – Sean
[00:08:06.080] –  Darryl
And now one of the things that I’m strongest at is when we… And being the engineer, and fixing bikes and selling likes it. I’ve got a very, I guess, logical, sequential mind. I like to know how things work. They’re puzzles and they need to piece together. With that has brought me systems thinking and methodologies and structure into helping businesses grow, specifically in the marketing side. I remember early on people would say, Well, how do I get ROI? And this is, I guess, pre-Internet days, and it was, How do I know the ROI on my marketing? And the standard response was, Well, half your marketing is going to be effective. We just don’t know which half, so you got to keep doing it all. That didn’t sit well for me, and I was always going, How do we systemize marketing? How do we create a marketing machine where I know that if I do X input there, and if I keep focusing on the input there, it will filter down and cascade down, and there’s your output. And today, that language shows up. A lot of people talk about where you want lead indicators rather than lag indicators.
[00:09:15.620] –  Darryl
And there’s a lot of language developed better than I ever could. But I was just never satisfied with the, Well, yeah, half your marketing spend is going to be wasted. That just didn’t make sense to me. You needed to be measuring the effectiveness and having a machine so that you could reproduce to get the results you wanted and predictable results.
[00:09:37.910] – Sean
This is a good segue into your business. Why don’t you tell us the name of your business? You told us you serve SMEs a little bit, but why don’t you go a little deeper into that? What’s the name and what does it specifically do?
[00:09:47.870] –  Darryl
The name is Succession Plus. What Succession Plus is set up to do is to, I guess, help business owners avoid the mistakes I made. I didn’t found Succession Succession Plus. Succession Plus was started in Australia by a friend of mine, Craig West. Craig and I worked together in that previous business. We met in that previous business I mentioned, and we just became friends and hit it off and kept in contact. He stayed in Sydney, I moved to the UK, and we just kept in contact over the years. When I realized that there was a gap, that business owners were running through their business, just growing their business, trying to increase their profitability every year, looking at the bottom line and hoping that one day someone would come and buy their business. Then when that did happen, like 80% of deals fall through. I realized and became a lot of my awareness and focus, if you like, was around helping that. That, to me, is a massive problem in the marketplace because business owners often think of their business or exiting their business. I saw a stat yesterday. I think it’s 78% of business owners are counting on the proceeds of selling their to fund their retirement or life after work.
[00:11:03.820] –  Darryl
I saw that as a need, as something needed to be solving. I started doing my research and getting involved in that here in the UK. Then I remembered, Ah, Craig’s doing that in Aus. Why don’t I bring the brand over here? We’ll scale that brand and create an international brand. I brought Succession Plus to the UK. Craig developed the methodology based on a lot of the work that we did in the earlier days, created the 21 Steps program, which is the 21 topics that as a business owner, you want to address to make sure that your business is ready when you’re ready to exit so that you can exit on your terms and maximize the valuation. And And to me, that’s just something that… If four out of five businesses are failing to sell, we got to change that.
[00:11:52.320] – Sean
Yeah, that’s awesome. I want to give people a little… Wet their appetite a little bit with a few of those topics. So the 21, we’ll get to that in a second. But first, that 80 % is profound. What would you say are the main reasons why these business deals fall through?
[00:12:11.820] –  Darryl
Business owners are control freaks.
[00:12:13.950] – Sean
[00:12:15.770] –  Darryl
It’s as simple as that. How many times have you heard business owners, if the audience are talking to or know or chat to business owners, something that a message that is rather common is, well, you just can’t find good help nowadays. You can’t find good employees. They just don’t work as hard as I do. If you want to get something done, you got it properly, you got to do it yourself. There are all those control freak issues, and they haven’t figured out, how do I structure? And let me go back a step. You need those control freak issues in the early days in a startup. Startup of the first four or five employees. If you’re going to get over a million revenue, you need to create a second layer. You You need to create a team, a management team, and you need to be able to delegate to that team and provide a structure or a framework for them to do what you ask them to do so they know what’s expected of them and they know how it’s expected to be done. You need a reporting mechanism in place. Here’s where my systems thinking came, was really helpful in the early days of doing this.
[00:13:22.010] –  Darryl
What’s the input to a process? What’s the output you’re expecting? What is the actual output? How is it deviate from what you expected? The only reason you know is because you’ve got a measure in place. Then based on that measurement, you provide some feedback and adjust that feed, the new input. You adjust it, go through its process, what’s the new output? That system’s thinking at an engineering level. We just started to apply that to all sorts of businesses and documenting it just like they do in quality management systems. You document it so that everyone knows what’s expected There’s no surprises. And that’s the number one thing that business owners struggle to burst through that first inflection point, that hurdle of growing their business out of being self-employed into a business that has real asset value as something that can be sold if they wanted to.
[00:14:19.460] – Sean
I see so many small business owners, they really overlook the importance of systems and documentation, standard operating procedures, the the whole attitude you were painting a picture of, of like, you can’t find good help, and nobody works as hard as me. And it’s like the root of that, and I’ve seen this many times before, is you’re not putting clear expectations into writing and then tracking that month over month, or if you track it more frequently, you, your background in consulting and engineers really together put you in that framework. You have to have these systematic processes in place, It’s really like that’s how you build a business. You can’t just wake up and be like, Well, today’s the day, based on hope and dreams, I’m going to build my business. It doesn’t work that way.
[00:15:10.580] –  Darryl
Exactly. And you’ve got to document it. Otherwise, it’s all in your head. People don’t read minds as much as we’d like to think, Why don’t they do it the way that I would do it? Well, you didn’t tell them, you didn’t show them, you didn’t train them, you didn’t document it so they could come back to it because we all need to hear something 6 to 10 times before it becomes ingrained. We need to be ready to learn when it’s there. So you can’t hear something once and just do it. And why can’t these people act like owners? Well, if you want them to act like owners, make them owners. They’re not owners, they’re employees. It’s a different mindset. It’s a different energy. We need them. Let’s guide them, look after them, treat them with respect, and everyone craves good leadership. Frankly, you’re being a bad leader. No one wants to work for a frustrated leader. And because they’re employees, they can leave. And they’re not leaving because they’re incompetent. They’re leaving because you’re micromanaging them and getting in the way and made it such a terrible place to work. It’s not that they’re bad employees.
[00:16:08.640] –  Darryl
It’s that you’re a terrible leader.
[00:16:11.560] – Sean
Yeah, good point.
[00:16:12.720] –  Darryl
Did I say that out loud? Go ahead, Darryl.
[00:16:15.710] – Sean
Speak your mind. Let’s take a quick commercial break.
[00:16:18.690] – Commercial Break
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[00:17:19.720] – Sean
All right, back to the show. Let’s give people a few of these of the 21 topics.
[00:17:27.290] – Sean
Let’s talk about a few if you wouldn’t mind. And it doesn’t have to be the first three. You can highlight a few of your favorites that stand out. So why don’t you give us the first one?
[00:17:35.850] –  Darryl
What I’ll do, Sean, is I’ll break it up because I’m a simple bloke, and I need to break these down in systems. There’s 21 topics I need to address. And what we need to do is categorize them in a way that they can be remembered. There’s five stages. So 21 steps spread over five stages. First thing we need to do is identify the value of the business. Let’s identify. Let’s do a stock take of what my business looks like today and all the mechanisms, the resources, the assets that are in my business today. In that identification phase, let’s have a look at what the business could be worth today. If my business was running at best practice performance, what could it be worth? If my business was attractive to a strategic acquirer, what could it be worth then? So my starting valuation all the way up to what it could be worth if I made it attractive. So we can show the business owners the potential, the valuation potential they have in their business if it were exit ready when they’re ready to leave. So there’s the first thing. Let’s just identify the value. Then what we want to do is we want to move into stage two, which is we’ve already got a business started.
[00:18:42.500] –  Darryl
Whether you’re self employed or it’s a bit of a going concern and it’s a business. Let’s protect what you’ve already got. If you’ve got a number of other business owners, let’s make sure that we’ve got a shareholders’ agreement in place. If an unplanned exit were to happen, that everyone left behind all the stakeholders and family members and employees and shareholders, get treated and looked after exactly as you intended. So what happens is as you intend. Let’s protect what you’ve already built. And that’s a bit like building a foundation for a house. Can only build a house if I’ve got a good solid foundation. Now, I’ve protected what I’ve already got. I’m now ready to build or to maximize the valuation on a stable foundation. So here’s where I start to think about all of the intangible assets. I was talking to someone just earlier today where he said, What’s the valuation of my business. And I said, Okay, well, what’s the balance sheet value? And he said, I’ve got two and a half mil in balance sheet value. And I said, And the brokers are telling you that you got a valuation of 10 mil?
[00:19:42.570] –  Darryl
And he goes, Yeah. I said, So seven and a half mil of your valuation is coming from your intangible assets. So when you’re writing down and protecting, why are you worrying about all the items on your balance sheet when it’s all those undocumented items in that seven and a half mil that you need to document and get on top of because they’re the bits that are going to be your undoing when someone does some serious due diligence on your business. He’s gone, So we need to maximize the value by getting the intangible assets from being the world’s best kept secret to putting them on display so everyone, the marketplace, knows about them. Once I’ve maximized the value, I then want to extract the value. If I’m ready to exit, I need to make sure that I get the money out. And if I’m planning it, I want to do it as tax efficiently as possible and risk minimizing It’s my risks as much as possible. I don’t want any leftovers to come back and bite me years down the track after I’ve exited the business, after it’s out of my control. And stage five is, well, if I’ve done this right, if I’ve done a really good job, I’ve now got a big fat bank account, which I’m now managing cash.
[00:20:50.050] –  Darryl
So I’ve got a different type of investment that I need to look after. I need to manage the value for multi-generations. Ideally, we don’t want the same thing to happen to our family that happens to that classic story of the first generation builds it, the second generation maintains the wealth, and the third generation blows it. If we set up the right structures now and get the right advice, we can protect that multi-generation Rational wealth. So identify, protect, maximize, extract, manage at the five stages.
[00:21:22.410] – Sean
Got it. I was just going to summarize those. That’s awesome. Thanks for giving us that framework there. To really hammer on that number five, I had somebody else in the podcast a while back that said, after you sell a business or let’s say a significant amount of capital comes into your life, it’s a lot harder to hang on to it than it is to have made it in the first place. And that concept is hard for people because it’s like, Gosh, it’s a lot of work to make, build a business over years. But then when you get the money, all these temptations come up, and all these things you could invest in or buy or do this and that, and it’s a lot harder to keep that money. So So I like that. That number five is part of your entire process.
[00:22:04.290] –  Darryl
Absolutely. And I guess it comes from, how many lottery or winners do you see that have made millions? And later, a few years down the track, they’re back to where they started and got nothing to show for it. They’ve just blown it and wasted it. And partly that’s their fault. But if they got some good investment advice and paid for a professional, they could have set themselves up and changed their life for a long time.
[00:22:31.140] – Sean
Let’s talk about a timeline here. Let’s say, and I talk to a lot of tech founders or people building tech businesses, and let’s say they’re about three, four years in and their annual reoccurring revenue is now north of a million. In and they’re thinking about, okay, at some point I want to sell. What can they start doing now to prepare? And let’s talk about the timeline as well. How long will it take to prepare, make sure everything’s in place so they can properly sell and maximize that reseell value.
[00:23:01.340] –  Darryl
Yeah. I was having this conversation that we have regularly. Why have some valuations of tech businesses? Why are they so different to, I guess, traditional brick and mortar type businesses or even service businesses? But it’s still a business, right? So it’s just the multiplier, the valuation multiplier that changes. There’s everything else that’s the same. What have they got in their favor? They’ve set up the revenue structure to be really low risk. They’ve got tech businesses, typically online businesses, so they’ve got low overheads. They can scale really well. If they manage their churn, if they got their product right and they can manage their churn, they’ve effectively got clients on ongoing contracts that are long term contracts with a low failure rate. So that’s why tech businesses, to my understanding experience, have those high evaluations. But Everything else they need. They need to build a brand. They need to be known for the brand. Now in a tech business, it’s not really possible. No one goes to Facebook because it’s Mark Zuckerberg. They go to Facebook because it’s Facebook, which is totally different to a service business. They don’t go to a high-profile legal practice for their name.
[00:24:18.430] –  Darryl
They’ll go because of the lawyer there who’s going to do the work for them. So there’s an advantage of what a tech business has got. But you still need… The principle is you need a brand and you need a position in the marketplace. If you You’ve got a competing product, why should I go to brand X as opposed to brand Y? And so there’s an intangible asset that we need to work on. We need to document the business systems, the way work flows through the waterfall, as I sometimes call it, from That marketing, that channel, that route to market, to getting them interested in your product, to getting them a taster, to getting them to buy, to becoming a client and staying as a client, and then telling all their friends about it. That process or the client journey is the same in context as it is for any other business. If you’ve got that mapped and documented and the documentation everyone is trained in that process and knows how to pull the levers of that process, there’s something that you need to do. Document that process in your business. So that’s a workflow in your business.
[00:25:17.070] –  Darryl
The thing that a lot of business owners miss or people miss when they’re doing and they’re going, All right, I need to document. I need to systemize my business or systematize, as some people say, I need to do, is they tend to just systemize the operational workflow from that marketing concept all the way through to client fulfill. The extra smart business owners will document their management or their people process as well. So if I want to separate myself and I want to really create value in a business, I need to demonstrate that the business can run without the involvement of the owners. Now, the only way you can do that is to demonstrate that you’ve got a management team that shows how they make decisions, show how they formulate the best decisions, and implement those decisions without your involvement. So that’s what I call a management system. We refer to an agile management system because it’s got to duck and weave and work with you. But it’s all about going, hey, what’s the vision we’ve got? What’s our business plan and budget that we need to do to get to that vision? So how far do we need to get this year?
[00:26:21.060] –  Darryl
And then how do we keep each other accountable to make sure that we hit our budget this year and demonstrate that it hit it because it was a deliberate, conscious act of choices we made rather than, Hey, look, we hit our budget. How about that? Or, Hey, we went right up, or, We went down really low. Oh, well, better luck next year. If we can demonstrate consistency there and consciousness and being deliberate about achieving our budget, then that just gives a buyer really high level of confidence in the management team. It’s not hit or miss. It’s this team know what they’re doing. Again, that principle is transferable across any business, is the management team. Another thing I see across all sorts of businesses is culture. We go, This place has got a great culture. You go, What is it? It’s just a really good culture. Well, How do you describe it? So a culture is not something that just happens because we’ve got a ping-pong table and we go down the pub on a Friday night. A culture is not the culture that you end up with as a business owner. The culture is your deliberate act of what you do and don’t allow in your business.
[00:27:34.120] –  Darryl
And what you don’t allow is probably even more important than what you do allow and encourage. So I’m a big believer. It’s a culture is deliberate and conscious. It’s not an accidental buy product or just a bunch of people that you employed. It’s your behaviors and your beliefs that make up your culture. So there’s a few things that we focus on and get very conscious and deliberate about.
[00:27:57.720] – Sean
Love it. And to a touch on timeline, if somebody wants to really start preparing, I’m guessing they shouldn’t be two months before they want to sell. It should probably be a bit longer.
[00:28:10.650] –  Darryl
A little longer would be nice, yeah. It’s The dilemma we have, isn’t it? Because people are running along happily running their business, and then at some point, just the straw that breaks the camel’s back, or there’s some point they just, stuff, I’ve had enough. I’m out of I need to sell the business now. We want your business to be exit ready when you are, is the term. When you’re ready to exit, we want to make sure the business is too. And that includes when you’re just running your business day to day and someone comes and approaches you to make an offer without you looking for it. Because a lot of business owners go, Hey, look, my business is always for sale for the right price. I go, Great. What’s the right price? They haven’t thought about that. And if they did, they could do something But timeline. Here’s the way I look at it. If you broadly say that the business valuation is a combination of a profit number and a multiple number. The multiple is the intangibles and the risk factors. The profit are the tangibles. They’re the spreadsheet items that you can influence and become more efficient around the business.
[00:29:22.670] –  Darryl
If you just tidy up the profit number on the business valuation, these are efficiency improvements, and they’re typically one-off. Once you’ve done them, they’re there, they’re in the business, and you can improve the efficiency. If you just work on those, it’s 6-12 months, and you’ll get an instant fix. If you want to work on the intangibles, the things that influence the multiple, These are the things that Michael Gerber says are working on your business. And when you’re working on your business, you’re typically working 12 plus months ahead. What does that mean? It means I’m working on this project for 12 months before it hits my PnL and starts to show benefit in the PnL statement, so it starts to turn into cash. Positioning my business, my brand, for example, changing the way people think about my brand, I spend 12 months on it before it makes a difference and people start believing and understanding my position. But when I get it right, I can get up to a 30% price premium for that. That’s when it’s the bottom line. If I’m working on the intangibles, the things that are affecting the multiple, I need to allow 2-3 or more years to work on that.
[00:30:29.370] – Sean
Love the timeline breakdown. Really appreciate that. That’s great expectations for somebody wanting to sell the harder items like the numbers, getting your financials, all that, 6-12 months to really tighten that up. But your intangibles, the processes, documentation, people, 2-3 years makes a lot of sense. I’ve worked for some large corporations and helped them with some of that. That does not happen overnight. It’s a process.
[00:30:54.620] –  Darryl
Well, exactly. And it just shows you that when you put it in perspective, if I improve the profit, I can maybe improve it by… If I improve it by 20%, that’s significant. But if I work on the multiple, I can improve the multiple by a whole digit or more, that’s going to make a much bigger difference to my valuation. It stands to reason that it’s going to take a fair bit longer to do it and get those results.
[00:31:19.330] – Sean
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[00:32:16.180] –  Darryl
Look, it’s going to sound cliché, but look, the sooner you start preparing for exit and getting your business exit ready, you know that it’ll always be ready when you are. And the big advantage there, like the buy product It’s almost the unintended byproduct of having your business exit ready, is that it’s actually more profitable and an easier business to run anyway. So why wouldn’t you? Just because it’s exit ready doesn’t mean you have to exit. So there’s the That’s an interesting, I guess, side benefit of being exit ready.
[00:32:49.070] – Sean
There’s the old saying, a failure to plan is a plan to fail. Always have a plan in place.
[00:32:56.540] –  Darryl
And the military will tell us something about, Yeah, the best plan fails the first step of battle or something like that. At least if you have a plan, you got half a chance to get into where you want to go. But if you got no idea where you want to go, you’re always going to get there.
[00:33:11.030] – Sean
Well put. All right, let’s have some fun here. We got the rapid fire round. This is the part of the episode where we get to find out who Darryl really is. If you can, try to answer each question in about 15 seconds or less. You ready?
[00:33:24.860] –  Darryl
[00:33:25.650] – Sean
All right. What is your favorite podcast?
[00:33:27.970] –  Darryl
Favorite podcast? I’m a big podcast listener. All my podcasts are business-related. I’m a bit of a geek. But one I really enjoy listening to is one called Freekonomics. It’s been around a while. It’s a book, it’s a radio show. They’ve always got something interesting, one I enjoy listening to.
[00:33:45.460] – Sean
Yeah, that’s in my Apple playlist. I’ve listened to a few episodes. That’s great. What is a recent book you read and would recommend?
[00:33:54.730] –  Darryl
So I’m not a reader. I love digesting books. So I’ve been on And Audible since about 2003. So I love Audible. All my books are pretty much, again, business books with a few running books and cycling books and similar books. But the one that I read recently, and I was really late to the party on The first one that I really enjoyed and just resonated with me, was… Now, what’s it called? I think it’s called the Membership Economy by Robbie Kalman Baxter, I think it is. So showing you how to She did a lot of work with Netflix in the early days, I understand, and helping them structure basically their pricing, and how do you get clients to move from paying for projects or paying from time into becoming a subscription. It’s more about than just the pricing. It’s everything you have to do about in your business to reinforce that thinking so that your price reflects your proposition. So the membership economy, Robbie, Kilman, Baxter.
[00:34:59.690] – Sean
Just added it to my Amazon cart as we speak. Thanks for that tip.
[00:35:04.630] –  Darryl
I think you’ll enjoy it. I think it’s been around a while, but it’s still got a lot to learn today.
[00:35:11.060] – Sean
Awesome. All right. What is your favorite movie?
[00:35:14.270] –  Darryl
Okay, so Movies, I don’t know if I got a favorite movie, but I like really trashy shoot-up, Basic No Plot, Arnie Stallone, Jason Statham type movies, beer. I get together with a few mates once a month. Our wives go to Book Club and we have a sanctuary at our house or we rotate. We call it Philosophical Society. We drink beer, we eat pizza, and we watch a really bad movie and we don’t have to remember the plot.
[00:35:49.210] – Sean
Yes. Really strong intellectual stimulation. I’m thinking of some of the classics like Commando and Last Action Hero.
[00:35:57.280] –  Darryl
All of that, the Expendables. Yeah. We talk about the Jason Statham movie or that Liam Neeson movie. Why? Because the plot is always exactly the same. It’s the same movie. It just got different support actors.
[00:36:13.340] – Sean
But you should see the ongoing thread I’ve got with friends on Jason Statham films. I like the guy, and I appreciate what he’s done. But man, some of the plots are like, it’s literally the same movie and now a different title. It’s exactly the same movie.
[00:36:27.300] –  Darryl
That’s why we call it The Jason Statham.
[00:36:29.870] – Sean
It sells. There you go. That’s fun. Before we jump on the next question, was there a recent- The characters. Yeah. Was there a recent film that you and your buddies poked fun at?
[00:36:40.430] –  Darryl
Well, as I said, we don’t have to remember the plot because it’s always But one I’ve enjoyed, or not a movie, but what I’ve been watching just recently, again, is the series, Succession. I don’t know if you’ve watched that. But again, horrific characters. It’s a case study on how not to Perfective Succession Planning.
[00:37:02.890] – Sean
That makes perfect sense with your business model. I figured you would love that series. It’s great.
[00:37:08.410] –  Darryl
And he’s such a great actor. And how many ways can you say the F word and creatively? And I think he’s nailed them all.
[00:37:18.950] – Sean
Theisms. Yeah, the comments andisms. Anyway, no, good one. All right, next question here, a little more serious. What is the worst advice you ever received?
[00:37:30.170] –  Darryl
Just work harder.
[00:37:31.530] – Sean
Thank you.
[00:37:34.560] –  Darryl
I’m not saying you don’t have to work hard, but it’s not just about hard work. You got to be working on the right things to get the results.
[00:37:44.250] – Sean
Amen. I agree. All right, flip that equation. What’s the best advice you ever received?
[00:37:49.260] –  Darryl
The best advice is from a mate I used to live with many years ago. And he told me he’d been in business on his own before I went into business on my own. And He went through the ranks of a sales and insurance and now runs a really successful multidisciplinary practice. And he said, Darryl, what you got to remember is activity will get you the results. You’ve got to do the right activity, but just keep doing the right activities, and that’s what will get the results. And it’s almost the same but different of just work harder, but it was more nuanced on working on the right things and understand your business model and where you need to be putting that activity in. Don’t stop. You got to keep working at that top of the funnel or the lead indicators, and it will all flow through. So that’s how I took that advice.
[00:38:40.780] – Sean
I love that, the deliberate and consistent activity and what moves the needle in your business.
[00:38:46.240] –  Darryl
[00:38:46.860] – Sean
All right. Last question here, the time machine question. If you could go back in time to give your younger self advice, what age would you visit and what would you say?
[00:38:55.520] –  Darryl
Take more risks. And I can rationalize it, but I’m an engineer, so I’m naturally got a certain amount of conservatism about me. I know I wasn’t a good engineer because compared to my mates who are still engineers, I’m an extreme risk taker. But you compare me to entrepreneurs, I’m very conservative. So, yeah, I take more risks.
[00:39:20.930] – Sean
I love that. Great advice. And if somebody wants to reach out and learn more about your business, maybe they want to move into the process of potentially selling someday, where can they reach out to you?
[00:39:31.990] –  Darryl
You can get me. I’m Darryl Bates-Brownsword. There’s only one of me on LinkedIn. So if you just search that and put that name in Google, I’m the only one who’s going to come up. So there’s an advantage of having a unique name there. Linkedin or the website where you can find me is succession. Plus, PLUS. So real easy. They’re the two best ways to find me.
[00:39:55.890] – Sean
Awesome. All right, Darryl, thank you so much for your time.
[00:39:58.600] –  Darryl
Love it, Sean. Thanks for having me. Enjoyed it.
[00:40:00.950] – Sean
Hey, I’d like to say thanks for checking out this podcast. I know there’s a lot of other podcasts you could be listening to, so thanks for spending some time with me. And if you have a moment, could you please head over to Apple Podcasts and leave a five-star review. The more reviews we get, the higher this podcast will rank. All right, stay tuned for the next episode. We’ll see you.