We are in the middle of wedding planning for our daughter, and it is quite the process! My husband has offered many times to just pay her and her fiancé out so they can elope – weddings are expensive! According to The Knot’s Real Weddings Study, the average cost per guest in Wisconsin is $205.
Why am I sharing wedding costs with you? Weddings, which can run $20,000 to $40,000 or more depending on the size, are a sunk cost. I know it may sound harsh, but the reality is there is no financial return on that investment. The return is intangible – joy, celebration with friends and family, and the start of the couple’s life together. In fact, most people spend significant dollars on their wedding and never once ask the question: What is the ROI (Return on Investment)?
The ROI of Business Exit Planning
In contrast, as a strategic business management consultant, I find many business owners are hesitant to engage in business exit planning, citing the cost. It's understandable – when you're used to managing expenses, investing in consulting services can seem like just another cost.
One of the key areas of discussion I have with clients is around the growth in value of their business based on the investment in services – the ROI. Recently, we’ve begun preparing annual client dashboards to clearly show how the investment in our services translates into value creation and contributes to a successful business exit strategy. Unlike a wedding where the cost is a sunk cost, preparing for your business exit isn’t just an expense. It’s an investment that will require time and effort – and where the ultimate ROI is securing your future.
From Good to Great: A Winning Exit Strategy
A past client of ours sought counsel even though he was running a good business. The owner was innovative in his industry and knew how to market the company’s services to differentiate them from the competition. So why did he feel the need to invest in outside services? He wanted to go from good to great, with the ultimate goal of positioning himself and the business for a successful exit.
What was the situation for the business prior to engaging?
The business value was not where the owner needed it to be to retire.
The owner was overly involved in day-to-day operations due to few replicable processes, procedures, and systems.
There was no leadership team to help drive results and make decisions.
There was no strategy in place to scale the business and free the owner up to work ON the business.
What did the investment require?
Identifying the profitability of each of the company’s three service offerings
Establishing a clear mission, vision, and values to align and drive organizational culture.
Empowering and training key team members to drive results.
Developing a strategic plan that aligned activities to drive growth and profitability and build business value.
Developing documented standardized process that streamlined workflows and increased capacity.
What did the investment return?
45% Revenue growth
47.5% increase in Gross Profit
2.8X increase in the valuation multiple
178% increase in the business valuation
In four years, the owner removed himself from daily operations and now has the freedom to focus his energy where it brings the most value.
The owner is confident, knowing he’s built a value-based, transferable business that will ensure he has options when he’s ready to exit.
He went from Good to Great!
Exit Planning is an Investment in Your Future
In life there are decisions we make to buy something just because we want it, not because it has any logical investment return. Investing in our daughter’s wedding is one of those things for my husband and me. To have a special day to celebrate her and her fiancé is a decision we have made because the joy and celebration is worth the cost, without expecting a return.
However, when it comes to planning for your long-term financial security and that of your businesses, driving profits, building wealth, and building a business that you can exit on your own terms takes both time and investment and has an expectation of a return.
Shouldn’t you be planning, preparing, and investing in your own happily ever after?
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Jayne McQuillan, CPA, MBA, Certified Exit Planning Advisor (CEPA) is the owner of Journey Consulting, LLC and author of The Value Journey: How to Drive Profits, Build Wealth, and Exit Your Business on Your Own Terms.
Our firm is focused on providing business owners and their businesses with strategic planning, exit planning, financial expertise, and organizational improvement. We use a holistic approach within all of our services by aligning leadership with business strategy and outcomes.
Schedule your complimentary consultation to begin your Value Journey today!
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