August 12, 2025 • 27 mins
In this workable episode, Darryl Bates-Brownsword, Founder of Succession Plus UK, shares strategies to make your business sellable. If you struggle with exit planning or maximizing value, you won't want to miss it.
You will discover:
- How to start exit planning early to ensure a high-value sale
- Why reducing owner dependence boosts your business’s marketability
- What intangible assets like IP and branding increase valuationThis episode is ideal for for Founders, Owners, and CEOs in stages 5,6 of The Founder's Evolution. Not sure which stage you're in? Find out for free in less than 10 minutes at https://www.scalearchitects.com/founders/quiz
Darryl Bates-Brownsword helps business owners turn their life's work into a valuable legacy. As an expert in succession and exit planning, he works with SMEs to build resilient, sellable businesses that thrive without owner dependence. Through his 21-step methodology and Exit Insights podcast, Darryl empowers entrepreneurs to maximize business value, minimize risks, and exit on their terms. Darryl's insights are a must-hear if you're ready to secure your future and create a business buyers will love.
Want to learn more about Darryl Bates-Brownsword's work at Succession Plus UK? Cconnect with him on LinkedIn at https://www.linkedin.com/in/darrylbates-brownsword/ or check out his podcast at exitinsights.co.uk
Mentioned in this episode:
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Scott Ritzheimer (00:00):
Hello, hello and welcome. Welcome once
again to the start, scale andsucceed. Podcast, the only
podcast that grows with youthrough all seven stages of
your journey. As a founder andI came across this crazy
statistic that I think allbusiness owners should know,
and that is four out of fivebusinesses fail to sell.
That's 80% that's insane. Andso, especially for those of
(00:21):
you stage five CEO foundersout there who have an eye on
becoming owners or sellingyour business outright, this
is a must watch episode,because here with us today is
a podcast friend of mine, theone and only, Daryl Bates
brownsword, who helps businessowners to turn their life's
work into a valuable legacy.As an expert in succession and
(00:43):
Exit Planning, he works withsmall and medium enterprises
to build resilient, sellablebusinesses that thrive without
owner dependence through his21 step methodology and exit
insights podcast, Darrellempowers entrepreneurs to make
to maximize business value,minimize risks and exit on
their terms. Darryl's insightsare a must here if you're
(01:03):
ready to secure your futureand create a business,
business that buyers willlove. And he's here with us
today. So Darrell atsuccession, plus you guys
guide founders through,especially as stated on your
website. These five big we'llcall them value stages, to
make their business saleready. So for a founder, had
(01:26):
some success, they've got anexecutive team around them.
The business is reallyhumming. For all intents and
purposes. They have no reasonto think about selling right
now, but someday they will,and oftentimes it's too late.
So for those who are in thatplace, they don't necessarily
need to get out you, and Iknow that's the best time to
start working on your exitstrategy. So for that person,
(01:48):
what are these five differentstages, and why are they so
essential for a high valuesale?
Darryl Bates-Brownsword (01:55):
Thanks Scott for the fantastic
introduction, and I love thefact that we're getting
straight into the moody stuff,so it's 100% value straight
off the bat. So five stages,these are just the stages that
we need to think about. Ifwe're going to be selling our
business, we want businessowners to be moving beyond
that. Hey, I think my businessis worth X. I've, I've seen my
(02:16):
mate sell his business, and Italked to him down the pub,
and he got this and I gotthat, and mine's better than
his. It's, there's a bit of ablack art and a black box to
valuing a business. But let'sput you on the front foot.
Let's make sure that you arein the best possible position
because of that stat that youshared before, like, four out
of five businesses don't getto sell, and it's the smaller
(02:39):
end of the market where thatoverweight that stat, but
still there's why do they notsell? Is we need to start
thinking about when someone'slooking to buy your business,
how are they going to valueit? What are they looking for?
And all they're looking for.Well, all they're looking for,
but the big picture of whatthey're doing is they're
going, what's the likelihoodof this business continuing on
(03:02):
its current path or itscurrent trajectory once the
ownership changes, and themore you can mitigate that
risk, the more value you'regoing to do. So let's quickly
look at the five stages. Thefirst one is, let's start our
exit planning. So let's justidentify what we've got
already. Let's do a snapshot.Let's do some due diligence
from your side of the table,while you're in control, while
(03:23):
you own the business. Thenlet's then sort of protect
what you've already built.You've been building your
business and doing a whole lotyourself and running the
business and growing andgetting annual growth. But
let's just sort of protect andmitigate all the risks that
are just out there that you'reflying by the city of pants,
and I'm not saying you'reunstructured or anything, but
(03:43):
there's just a whole lot ofrisks that sit in your
business that you're justconsuming every day. So let's
protect what you've got, andpart of that protection will
make sure that your businessis worth at least the standard
industry average. Once you'vegot that under your belt, you
can then start to go breathe asigh of relief, because you've
(04:04):
actually built a nicefoundation for your business.
You can then start thinkingabout, how do I maximize the
valuation of my business? I'vegot a nice foundation in
place. I've secured, if youlike, the standard industry
multiple now, what are allthose intangible things I can
start to work on that willincrease the multiplier of my
profit number and increase thevaluation that way. So all the
(04:27):
intangible assets. Now, onceI've done I've been looking at
that, and I can take mybusiness as far as I want to
go. So there's a simpleformula and list, if you like,
of the things you can work on,all the intangible assets. Now
I've maximized my value, I'llget to the stage four, and
that's how do I extract it,because then I want to make
(04:47):
sure that I'm set up for adeal, that I don't have to get
my valuation through an earnout. How do I secure that exit
transaction piece and get allof those component parts line
up so. Want you to exit on myterms, and then once I've done
that, if all goes to plan,I've set myself up. I've set
my family up. I've set thebusiness up so the business
(05:10):
will will continue to run andprosper without me or any
other owners involved. But nowI've extracted all of my
family wealth, it's beensitting in that that risky
entity, the business facili,I've extracted it out, and
I've got a, hopefully now, anice, really healthy bank
account. And I've got adifferent type of wealth to
manage. I've got a differentrisk profile for how do I
(05:31):
manage the value that I'vejust extracted out of my
business, and if I've donereally well, how do I make
sure that it's generationalwealth? How do I avoid the
different types of legal andtax traps that I haven't been
aware of over all these years.So it's I now need to manage
all of that wealth and createthe family value I've created.
Scott Ritzheimer (05:53):
Love it. I love it. So let's walk through
these briefly, because I thinkthere's some there's some big
opportunities to get thesestages wrong. So it's one
thing to know what they are.It's another to do them right.
So identify value stage rightout of the gate. What's the
biggest mistake that mostfolks make here.
Darryl Bates-Brownsword (06:11):
Thinking their business is worth a
certain number because ofindustry averages, because of
their mate sold his or herbusiness down the pub without
getting an independentvaluation. My encouragement
is, if you start the ExitPlanning, get a current state
assessment, understand whatyour business is worth today
(06:31):
and get that done by someonewho doesn't have skin in the
game. And what I mean is, ifyou get an investment banker
in your business or a businessbroker to value the business,
they're inclined, they'remotivated to give you a number
to win your business that'sgoing to seduce you into
working with them. So we'rejust doing the planning stage.
Let's start with anindependent valuation, and
(06:54):
then let's the big here's thebig tip, Scott, let's develop
when we start Exit Planning,or succession planning doesn't
mean I'm going to exit in twoor three years. It means I'm
just getting the business soit is exitable. Yes, do that.
I need to make the mindsetshift from revenue growth year
on year to valuation growth.Let me start measuring the
(07:16):
valuation of my business everyyear, because that's where the
rubber hits the road, right?Profits, vanity valuation,
sanity. Let's, let's, let'sget some serious methodologies
into our business and assessthe valuation, not just.
Scott Ritzheimer (07:31):
So good, so good. All right. So moving
forward, stage two, we've,we've gotten an independent
valuation. Now it's time toprotect that value. What are
some of the risks that you seedisappear under the radar?
We'll put it that way, whatare the ones, the biggest
risks that are right in frontof them, but that a lot of
(07:52):
founders miss.
Darryl Bates-Brownsword (07:53):
Biggest one is perhaps, owner
dependence, I guess, is, whodoes what? If someone's sick,
how do I, how do I transferroles and responsibilities
slickly? And that's, you know,is the business systemized? So
I guess I'm separatingoperational risk, and, you
know, methodology risk, Iguess, if you like, but
(08:16):
there's a whole lot of risksthat we can address by by
working with an insurancebroker, and we can protect our
income, we can protect all ofour business assets. We can do
all the standard things withgetting insurance policies,
but if we do a proper riskassessment, we want to start
looking at governance, we wantto start looking at systems.
We want to look at ownerdependence, and they're the
(08:38):
things that I really focus on,because we'll just outsource
and get a risk assessor intoto do a full blown risk
assessment, right? But whatare the things that we can do
we touched earlier. We want todemonstrate that the business
will continue on its growthtrajectory once the ownership
changes. And the best way todo that is to demonstrate that
(09:01):
as the owner of the business,you're not required in the
business, but you're, you'reyou're operating in just three
roles. And here's, here's my,my biggest tip here, if you
like, you want to make surethat you're seen as the
person, as the vision, andyou're sharing the vision, and
you're the big ideas person,going, we've got to go in this
direction. The management teamfigures out how to get us in
that direction and keep us inthat direction, management
(09:23):
team, leadership team,whatever you want to call
because it's an SME business,an owner in business, owner
led business, where the ownersare involved, not necessarily
in day jobs, but they'reinvolved in the business.
They're the keepers of theculture. No matter what we say
about vision and values andwhat have you, people are just
going to look to us forguidance on how we show up and
behave in the business. If webehave in a certain way,
(09:46):
that's the standard theyfollow. So we set the vision,
we keep the culture. And thethird thing is, we're not in
operational roles. We coach,we don't play so yeah, just
focus on those three things,then they. That's the biggest
risk mitigation gone. You'readding real value to the
business. You're coming upwith the big ideas, you're
coming up the big strategies,you're setting the culture,
(10:09):
and you're not involved on adaily basis, because you've
got people, competent people,who know exactly the scope of
their roles and the extent oftheir responsibilities running
the business. And they'rerunning the business to a
systemized approach, so thatyes, so they've systemized the
running of the business, andthey're using something like
Eos,
Scott Ritzheimer (10:25):
Fantastic, fantastic. So that gives us a
real, natural segue intomaximizing the value. So we've
got the base level. Hey, we'renot below market in these
areas. Now, how do we reallystart to step on the
accelerator. You talked aboutchanging our focus from
revenue growth or profitgrowth to valuation growth,
(10:46):
yeah. What are the what arethe main pitfalls here? How do
we tend to get this wrong, andwhat can we do better?
Darryl Bates-Brownsword (10:53):
The things we get wrong again is
making assumptions and justlooking at everyone else and
and what I see is businessowners, they're going, Hey,
look, this person sold hisbusiness and they got five
times. Mine's better than his,you know, and mine's worth
seven go, why? Substantiatethat claim? Or they'll go,
Hey, but that business got 12times. And we'll go, why? And
(11:14):
they'll go, well, they justgot lucky. I go, bullshit,
nonsense, right? So there's areason that they got 12 times,
and it's because they hadbuilt the intangible assets.
And what are the things wemean by intangible assets?
Well, they demonstrated thatthe culture was clean and
people stayed around and theyknew exactly what they were
doing, and they didn't havestaff turnover, and people
(11:38):
knew exactly what they'redoing. They knew they had job
descriptions. We had anorganizational structure. We
had systems in place to makesure that business is
consistent, repeatable,reliable. Everyone knew what
they're doing, and it meansthat they're not working
stupid hours to get thingsdone and peaks and drops.
Great culture. We've then got,we talked about systems. We've
got a systemized approach.We've then got some sort of
(12:01):
proprietary methodology aroundour product, and we can be a
service based business, butwhatever it is that you're
selling your service is aproposition, and it's got to
solve a problem that theclient has. Now they can come
to you and say, hey, I want ahaircut from you. If we're a
beauty salon or what have you,or they can go, I want the
(12:22):
Scott special. Thanks. Becauseeveryone knows that the Scott
special, and I've probablyused a bad name there, but
you're no it's definitely ITcompany name. So what we want,
we want, we want todemonstrate that to really
build value that the peopleare coming to buy the
proposition rather than thepurpose the person. And that's
why I said Scott was probablya bad, a bad, okay, we want
(12:45):
people to buy whatever yourbusiness sells, which is
packaged up and you've gotsome IP around it, and they're
either buying your methodologyor your name or your solution
name, or what have you. Wewant people coming to your
business for the process ormethodology, rather than
Scott, who's doing it, orDarryl, who's doing it, who we
love Scott, because Scottalways looks after us. He does
(13:06):
a great job. And I'll justfollow Scott, whichever
business he goes to next,right? That deflates value
from your business. So we'vegot some methodology, and the
next thing we've got is we'vegot some branding. Have we
branded the business is mymethodology now linked to my
brand, and the two are one andthe same. And whenever I talk
(13:26):
about brand X, I'm associatingit with that methodology or
that IP or product or whathave you. And then then bang,
that branding becomes known inthe marketplace. A lot of
business owners, especiallywhen they're small, they'll
get a logo and a brand and andsome letterhead done, and they
think they've done brandbranding so much more than
(13:47):
that. When you talk to thegurus, and it's being the
brand is a promise. It becomesit's like, if we we talk about
Trump as a brand, everyoneknows what you're going to get
with it, with a guy you know,doesn't matter which side of
the fence you sit on, you knowwhat you're going to get with
Trump. You may like it. Youmay not. It doesn't matter.
He's branded, and it's greatwell, and everyone knows what
(14:08):
to expect from him. That'swhat I mean by branding. So
your business needs to have animplied promise just that's
associated with your name.That's when you've nailed it,
and then your business isworth a whole lot more. Next
thing is on the littlemethodology that I use is, are
you scalable? If I've builtthis little prototype, if you
(14:28):
like, where I've got myproduct, my methodology, my
culture and my staff and mystructures and my systems in
place, and I've got my rootsto market tap, because I know
exactly who I'm solvingproblems for, and I know how
to approach my target market,then I've got a template, if
you like. I love Gerber'slanguage in the E Myth. I
think he called it a franchiseprototype, but you can then
(14:50):
plug and play and replicatethat business model in more
locations. You're scalable,right? So that that's the next
layer. If I can justdemonstrate that, here's my.
Prototype. I just need abucket of money, pe type
money, to come in, and then Ican, then the business will
scale up. But I've done allthe hard work. I've proved the
concept for you. Bang, there'sthe next piece. You put all
(15:14):
those things in place, you'regoing to get a top, top model
for valuation for yourbusiness.
Scott Ritzheimer (15:19):
Absolutely, absolutely. So that takes us
to the next stage here andunlocking that value. So this
can be really intimidating fora lot of folks, because it has
a huge impact on your life inmany ways. It's the it's the
final assessment of how you'vedone over this years, in all
these years, in a few ways,and there's a lot of emotion
(15:41):
riding in all of this. So aswe're walking into this unlock
value stage, how can we managesome of the emotion, and what
should we expect?
Darryl Bates-Brownsword (15:50):
You've I think you've nailed it
there, Scott, there's a lot ofemotion involved. And yeah,
I've built this business overso many years, it's hard not
to be attached to it, and it'shard to separate. It's been
like when your kids go and getmarried, I guess, and or they
go and they leave home, whichthey're going to do as much as
you love having them at home.You love when they leave home
(16:11):
to give you a break, but atthe same time, you don't want
them to go because they're nowadults, and they're good
company, and they're with you,so your business is going to
leave home at some point. Sothe best thing we can do is
get a third party involvedwho's not emotionally attached
to our business, yeah, todrive the process and to drive
(16:32):
the negotiations. So whetherthat's an investment banker
and a CFO and a lawyer,they're the three that I would
always have as part of theteam, and I'd, in fact, get
the CFO involved two or threeyears before to start getting
the financials and thebusiness due diligence ready.
And even if you've already gota part time CFO in your
(16:53):
business, or even a full timeCFO, I would consider getting
a deal specialist CFO in tosupport your your regular
CFOs, because they've stillgot their day job that they
need. But you get a dealspecialist CFO in to get the
business specifically readyfor exit, because you don't
want anything to slow down thenegotiations. Once you start
(17:14):
talking deals, anything thatwill slow it down will
decrease the value of yourbusiness. So you've got your
CFO involved. You get yourinvestment banker. They know
the s and you want one thatgot specific knowledge of your
industry. Get them involved.They can do all the negotiate
negotiations on your behalf.And they're not emotionally
attached. They know themarket. They know what's
(17:35):
possible. They've got theexperience do all the
negotiations on your on yourbehalf. And the third one, an
attorney or a lawyer or asolicitor, depending on where
you're based, make sure youagain, get someone who's got
experience in deals to makesure that you're not taking
any unnecessary risks andyou're not going to be caught
out by the terms of the dealthat end up being more
(17:57):
favorable to the buyer, right?So they're three key players
you want, and that's where alot of people take shortcuts,
because they're expensive, butit's like L'Oreal. It's worth
it. There's an example ofbranding.
Scott Ritzheimer (18:14):
Love it. I love it. Now. What happens
here? And you mentioned thisin the very start of the
episode, you got a big wad ofcash inside a bank account
somewhere for most businessowners, way more than they've
ever had before. Yeah, andwith that bank balance comes a
huge responsibility to stewardit well. And so as we're
(18:35):
looking at that balance,thinking about turning it into
generational wealth, what aresome of the biggest mistakes
you see post exit, post salethat founders and owners make.
Darryl Bates-Brownsword (18:46):
Biggest one I see is when a business
owner has been building theirbusiness and building their
wealth steadily over 1520,years, and they may have an
IFA for a wealth manager orfinancial planner that they're
working with, and they've beenworking with all those years,
and because they've got a goodrelationship with them, they
(19:07):
want to be loyal to thatperson. Understand that we all
do. But just like when you'rerunning your business, your
suppliers and your clients,and especially if you're B to
B, your client, businessestend to be a similar size and
scale to you often work foryour most successful
relationships. So if you're a10 million pound business,
you're probably working withan accountant who is a 10
(19:30):
million pound or a $10 millionbusiness, because they're a
similar scale to you and scopeof operations, and they know
how to look after businessesof your size, sure. So you can
see where I'm going with this,if you, if you don't, you now
got a whole lot of money,because you've been really
prosperous in building thevaluation of your business,
and you got a big chunk ofchange, and we're now talking
(19:51):
that, yeah, you may have, youmay end up with 1020, 30,
hundreds of millions of of theproceeds that end up in your
bank account. You need to makesure that you're working with
a professional who's used todealing with funds and
investments of that size. Yes,after all those years of hard
work, you don't want to blowit by making the wrong
investments, by missing out onby paying too much tax, by not
(20:14):
protecting your generationalwealth, not looking after your
family members and doing theright things and getting your
wills, and you all of theother bits and pieces and
trusts, and you've just got toget someone who's an expert,
and I'm not an expert in thisarea, but you want to work
with someone who's got aprivate office, who's used to
dealing. They're not buyingretail investments and just
(20:36):
getting things off the shelf.These guys access to wholesale
they are. They're just workingwith private client, and that
amount of wealth to get theright advisors again is the
key here.
Scott Ritzheimer (20:50):
Yeah, yeah. Marshall Goldsmith nailed it
with what got you here won'tget you there. But what keeps
striking me as we're goingthrough this episode is, who
got you here won't get youthere, right? Most founders at
this stage have a brilliantteam around them. They're
executing. I mean, it's like,it's like clockwork. And a lot
of what goes wrong here is theteam that runs your business
(21:13):
is not the team you need totransition your business and
and that can be intimidating,but if you think about it, you
didn't know how to how tofigure out who you needed back
in the early days, right? Youfigured that, over time, with
the right guidance and theright focus, you can build
that skill for this stage ofthe your journey as well. And
(21:35):
and every one of thosequestions came back to a who,
right? It came back to who weneed in this process, and so,
so helpful. If you didn'tcatch that you're listening or
watching, go back and watch itagain, because you'll see that
the thread run all the waythrough and just make a list
of all the people you need toconnect with. And that's your
homework. But Darrell, beforeI let you go, because we've
got through these fivedifferent stages, but there's
(21:57):
a question that I ask all myguests that I'd love to ask
you, and then we'll make surefolks know how they can get in
touch with you, because I knowthey have questions, but my
question is this, what is thebiggest secret that you wish
wasn't a secret at all? What'sthat one thing you wish every
founder owner listening todayknew.
Darryl Bates-Brownsword (22:14):
The big one Scott is, and when
you, when you I didn't knowthis question was coming, and
I was sitting here going, Oh,what's going to hit me with?
Well, I know the answer, but Iknow the answer to this
straight away. The biggestsecret is, is kind of where we
started. This is we said, hey,look, only four out of five,
sorry, four out of fivebusinesses that go to market
don't sell, they don't end upwith a successful deal. And
(22:37):
that kind of is the biggestsecret. Because business
owners, the successfulentrepreneur. Business owners
that we're talking about arevery entrepreneurial.
Entrepreneurial people arereally optimistic people. And
all of them think, well, I'mgoing to be that 20% right? So
the biggest secret is theyjust assume that our business
is okay, we'll be able to sellit no problems and and they
(22:59):
don't do that any preparation.Because, like you're saying,
if we start preparing three,four or five, even 10 years
before we plan to exit, wemake sure we get to know the
right attorney, the rightlawyer to work with. We know
when to upgrade our taxperson. We know which m and a
consultant, broker, investmentbanker we're going to be
working with to that we geton. Weldon is an expert in our
(23:22):
industry, and and over theyears, we'll build a
relationship with them, andwhen we're ready, we can just
pull the trigger, and we canhave 100% confidence. And it's
not that we've done it before,but we've done all the
preparation that puts us onthe front foot, and we will
definitely be one of the 20%.
Scott Ritzheimer (23:40):
Absolutely, absolutely. Darryl, before I
let you go, I gotta know. Howcan we get in touch with you?
How can folks listening orwatching today reach out and
connect with you? Getsuccession plus,
Darryl Bates-Brownsword (23:50):
okay, the best way to get in touch
with me is through LinkedIn.You can see my name on the
screen. There's only one of meon the planet. It's good and
bad sometimes, but LinkedIn isthe fastest and easiest way to
get in touch with me, andyou'll get in touch from
there, you'll get through thewebsite and everything from
there.
Scott Ritzheimer (24:09):
Fantastic. We'll get that LinkedIn
profile in the show notes aswell, so you don't have to go
searching for it, although Iwish I was able to say that
you think like a name likeScott Ritzheimer, there
shouldn't be more than one ofus, but I'm a junior, so I
know the feeling that. Butanyway, Darryl, fantastic. I
love the simplicity of it andyet the power behind it, and I
(24:33):
hope it sparked something forsome folks listening today,
don't be one of the four infive. Be one of the one in
five, and follow these steps.Maximize the value of your
business, and you will be soglad you did reach out to
Darrell and the team. LinkedInnotes below, Daryl, thanks for
being here. It was a privilegeand honor having you on the
show. I really appreciate it.And for those of you watching
(24:55):
and listening today, you knowthat your time and attention
mean the world to us, I hopeyou got as much out of. This
conversation, as I know I did,and I cannot wait to see you
next time take care.
Hello, hello and welcome. Welcome once
again to the start, scale andsucceed. Podcast, the only
podcast that grows with youthrough all seven stages of
your journey. As a founder andI came across this crazy
statistic that I think allbusiness owners should know,
and that is four out of fivebusinesses fail to sell.
That's 80% that's insane. Andso, especially for those of
(00:21):
you stage five CEO foundersout there who have an eye on
becoming owners or sellingyour business outright, this
is a must watch episode,because here with us today is
a podcast friend of mine, theone and only, Daryl Bates
brownsword, who helps businessowners to turn their life's
work into a valuable legacy.As an expert in succession and
(00:43):
Exit Planning, he works withsmall and medium enterprises
to build resilient, sellablebusinesses that thrive without
owner dependence through his21 step methodology and exit
insights podcast, Darrellempowers entrepreneurs to make
to maximize business value,minimize risks and exit on
their terms. Darryl's insightsare a must here if you're
(01:03):
ready to secure your futureand create a business,
business that buyers willlove. And he's here with us
today. So Darrell atsuccession, plus you guys
guide founders through,especially as stated on your
website. These five big we'llcall them value stages, to
make their business saleready. So for a founder, had
(01:26):
some success, they've got anexecutive team around them.
The business is reallyhumming. For all intents and
purposes. They have no reasonto think about selling right
now, but someday they will,and oftentimes it's too late.
So for those who are in thatplace, they don't necessarily
need to get out you, and Iknow that's the best time to
start working on your exitstrategy. So for that person,
(01:48):
what are these five differentstages, and why are they so
essential for a high valuesale?
Darryl Bates-Brownsword (01:55):
Thanks Scott for the fantastic
introduction, and I love thefact that we're getting
straight into the moody stuff,so it's 100% value straight
off the bat. So five stages,these are just the stages that
we need to think about. Ifwe're going to be selling our
business, we want businessowners to be moving beyond
that. Hey, I think my businessis worth X. I've, I've seen my
(02:16):
mate sell his business, and Italked to him down the pub,
and he got this and I gotthat, and mine's better than
his. It's, there's a bit of ablack art and a black box to
valuing a business. But let'sput you on the front foot.
Let's make sure that you arein the best possible position
because of that stat that youshared before, like, four out
of five businesses don't getto sell, and it's the smaller
(02:39):
end of the market where thatoverweight that stat, but
still there's why do they notsell? Is we need to start
thinking about when someone'slooking to buy your business,
how are they going to valueit? What are they looking for?
And all they're looking for.Well, all they're looking for,
but the big picture of whatthey're doing is they're
going, what's the likelihoodof this business continuing on
(03:02):
its current path or itscurrent trajectory once the
ownership changes, and themore you can mitigate that
risk, the more value you'regoing to do. So let's quickly
look at the five stages. Thefirst one is, let's start our
exit planning. So let's justidentify what we've got
already. Let's do a snapshot.Let's do some due diligence
from your side of the table,while you're in control, while
(03:23):
you own the business. Thenlet's then sort of protect
what you've already built.You've been building your
business and doing a whole lotyourself and running the
business and growing andgetting annual growth. But
let's just sort of protect andmitigate all the risks that
are just out there that you'reflying by the city of pants,
and I'm not saying you'reunstructured or anything, but
(03:43):
there's just a whole lot ofrisks that sit in your
business that you're justconsuming every day. So let's
protect what you've got, andpart of that protection will
make sure that your businessis worth at least the standard
industry average. Once you'vegot that under your belt, you
can then start to go breathe asigh of relief, because you've
(04:04):
actually built a nicefoundation for your business.
You can then start thinkingabout, how do I maximize the
valuation of my business? I'vegot a nice foundation in
place. I've secured, if youlike, the standard industry
multiple now, what are allthose intangible things I can
start to work on that willincrease the multiplier of my
profit number and increase thevaluation that way. So all the
(04:27):
intangible assets. Now, onceI've done I've been looking at
that, and I can take mybusiness as far as I want to
go. So there's a simpleformula and list, if you like,
of the things you can work on,all the intangible assets. Now
I've maximized my value, I'llget to the stage four, and
that's how do I extract it,because then I want to make
(04:47):
sure that I'm set up for adeal, that I don't have to get
my valuation through an earnout. How do I secure that exit
transaction piece and get allof those component parts line
up so. Want you to exit on myterms, and then once I've done
that, if all goes to plan,I've set myself up. I've set
my family up. I've set thebusiness up so the business
(05:10):
will will continue to run andprosper without me or any
other owners involved. But nowI've extracted all of my
family wealth, it's beensitting in that that risky
entity, the business facili,I've extracted it out, and
I've got a, hopefully now, anice, really healthy bank
account. And I've got adifferent type of wealth to
manage. I've got a differentrisk profile for how do I
(05:31):
manage the value that I'vejust extracted out of my
business, and if I've donereally well, how do I make
sure that it's generationalwealth? How do I avoid the
different types of legal andtax traps that I haven't been
aware of over all these years.So it's I now need to manage
all of that wealth and createthe family value I've created.
Scott Ritzheimer (05:53):
Love it. I love it. So let's walk through
these briefly, because I thinkthere's some there's some big
opportunities to get thesestages wrong. So it's one
thing to know what they are.It's another to do them right.
So identify value stage rightout of the gate. What's the
biggest mistake that mostfolks make here.
Darryl Bates-Brownsword (06:11):
Thinking their business is worth a
certain number because ofindustry averages, because of
their mate sold his or herbusiness down the pub without
getting an independentvaluation. My encouragement
is, if you start the ExitPlanning, get a current state
assessment, understand whatyour business is worth today
(06:31):
and get that done by someonewho doesn't have skin in the
game. And what I mean is, ifyou get an investment banker
in your business or a businessbroker to value the business,
they're inclined, they'remotivated to give you a number
to win your business that'sgoing to seduce you into
working with them. So we'rejust doing the planning stage.
Let's start with anindependent valuation, and
(06:54):
then let's the big here's thebig tip, Scott, let's develop
when we start Exit Planning,or succession planning doesn't
mean I'm going to exit in twoor three years. It means I'm
just getting the business soit is exitable. Yes, do that.
I need to make the mindsetshift from revenue growth year
on year to valuation growth.Let me start measuring the
(07:16):
valuation of my business everyyear, because that's where the
rubber hits the road, right?Profits, vanity valuation,
sanity. Let's, let's, let'sget some serious methodologies
into our business and assessthe valuation, not just.
Scott Ritzheimer (07:31):
So good, so good. All right. So moving
forward, stage two, we've,we've gotten an independent
valuation. Now it's time toprotect that value. What are
some of the risks that you seedisappear under the radar?
We'll put it that way, whatare the ones, the biggest
risks that are right in frontof them, but that a lot of
(07:52):
founders miss.
Darryl Bates-Brownsword (07:53):
Biggest one is perhaps, owner
dependence, I guess, is, whodoes what? If someone's sick,
how do I, how do I transferroles and responsibilities
slickly? And that's, you know,is the business systemized? So
I guess I'm separatingoperational risk, and, you
know, methodology risk, Iguess, if you like, but
(08:16):
there's a whole lot of risksthat we can address by by
working with an insurancebroker, and we can protect our
income, we can protect all ofour business assets. We can do
all the standard things withgetting insurance policies,
but if we do a proper riskassessment, we want to start
looking at governance, we wantto start looking at systems.
We want to look at ownerdependence, and they're the
(08:38):
things that I really focus on,because we'll just outsource
and get a risk assessor intoto do a full blown risk
assessment, right? But whatare the things that we can do
we touched earlier. We want todemonstrate that the business
will continue on its growthtrajectory once the ownership
changes. And the best way todo that is to demonstrate that
(09:01):
as the owner of the business,you're not required in the
business, but you're, you'reyou're operating in just three
roles. And here's, here's my,my biggest tip here, if you
like, you want to make surethat you're seen as the
person, as the vision, andyou're sharing the vision, and
you're the big ideas person,going, we've got to go in this
direction. The management teamfigures out how to get us in
that direction and keep us inthat direction, management
(09:23):
team, leadership team,whatever you want to call
because it's an SME business,an owner in business, owner
led business, where the ownersare involved, not necessarily
in day jobs, but they'reinvolved in the business.
They're the keepers of theculture. No matter what we say
about vision and values andwhat have you, people are just
going to look to us forguidance on how we show up and
behave in the business. If webehave in a certain way,
(09:46):
that's the standard theyfollow. So we set the vision,
we keep the culture. And thethird thing is, we're not in
operational roles. We coach,we don't play so yeah, just
focus on those three things,then they. That's the biggest
risk mitigation gone. You'readding real value to the
business. You're coming upwith the big ideas, you're
coming up the big strategies,you're setting the culture,
(10:09):
and you're not involved on adaily basis, because you've
got people, competent people,who know exactly the scope of
their roles and the extent oftheir responsibilities running
the business. And they'rerunning the business to a
systemized approach, so thatyes, so they've systemized the
running of the business, andthey're using something like
Eos,
Scott Ritzheimer (10:25):
Fantastic, fantastic. So that gives us a
real, natural segue intomaximizing the value. So we've
got the base level. Hey, we'renot below market in these
areas. Now, how do we reallystart to step on the
accelerator. You talked aboutchanging our focus from
revenue growth or profitgrowth to valuation growth,
(10:46):
yeah. What are the what arethe main pitfalls here? How do
we tend to get this wrong, andwhat can we do better?
Darryl Bates-Brownsword (10:53):
The things we get wrong again is
making assumptions and justlooking at everyone else and
and what I see is businessowners, they're going, Hey,
look, this person sold hisbusiness and they got five
times. Mine's better than his,you know, and mine's worth
seven go, why? Substantiatethat claim? Or they'll go,
Hey, but that business got 12times. And we'll go, why? And
(11:14):
they'll go, well, they justgot lucky. I go, bullshit,
nonsense, right? So there's areason that they got 12 times,
and it's because they hadbuilt the intangible assets.
And what are the things wemean by intangible assets?
Well, they demonstrated thatthe culture was clean and
people stayed around and theyknew exactly what they were
doing, and they didn't havestaff turnover, and people
(11:38):
knew exactly what they'redoing. They knew they had job
descriptions. We had anorganizational structure. We
had systems in place to makesure that business is
consistent, repeatable,reliable. Everyone knew what
they're doing, and it meansthat they're not working
stupid hours to get thingsdone and peaks and drops.
Great culture. We've then got,we talked about systems. We've
got a systemized approach.We've then got some sort of
(12:01):
proprietary methodology aroundour product, and we can be a
service based business, butwhatever it is that you're
selling your service is aproposition, and it's got to
solve a problem that theclient has. Now they can come
to you and say, hey, I want ahaircut from you. If we're a
beauty salon or what have you,or they can go, I want the
(12:22):
Scott special. Thanks. Becauseeveryone knows that the Scott
special, and I've probablyused a bad name there, but
you're no it's definitely ITcompany name. So what we want,
we want, we want todemonstrate that to really
build value that the peopleare coming to buy the
proposition rather than thepurpose the person. And that's
why I said Scott was probablya bad, a bad, okay, we want
(12:45):
people to buy whatever yourbusiness sells, which is
packaged up and you've gotsome IP around it, and they're
either buying your methodologyor your name or your solution
name, or what have you. Wewant people coming to your
business for the process ormethodology, rather than
Scott, who's doing it, orDarryl, who's doing it, who we
love Scott, because Scottalways looks after us. He does
(13:06):
a great job. And I'll justfollow Scott, whichever
business he goes to next,right? That deflates value
from your business. So we'vegot some methodology, and the
next thing we've got is we'vegot some branding. Have we
branded the business is mymethodology now linked to my
brand, and the two are one andthe same. And whenever I talk
(13:26):
about brand X, I'm associatingit with that methodology or
that IP or product or whathave you. And then then bang,
that branding becomes known inthe marketplace. A lot of
business owners, especiallywhen they're small, they'll
get a logo and a brand and andsome letterhead done, and they
think they've done brandbranding so much more than
(13:47):
that. When you talk to thegurus, and it's being the
brand is a promise. It becomesit's like, if we we talk about
Trump as a brand, everyoneknows what you're going to get
with it, with a guy you know,doesn't matter which side of
the fence you sit on, you knowwhat you're going to get with
Trump. You may like it. Youmay not. It doesn't matter.
He's branded, and it's greatwell, and everyone knows what
(14:08):
to expect from him. That'swhat I mean by branding. So
your business needs to have animplied promise just that's
associated with your name.That's when you've nailed it,
and then your business isworth a whole lot more. Next
thing is on the littlemethodology that I use is, are
you scalable? If I've builtthis little prototype, if you
(14:28):
like, where I've got myproduct, my methodology, my
culture and my staff and mystructures and my systems in
place, and I've got my rootsto market tap, because I know
exactly who I'm solvingproblems for, and I know how
to approach my target market,then I've got a template, if
you like. I love Gerber'slanguage in the E Myth. I
think he called it a franchiseprototype, but you can then
(14:50):
plug and play and replicatethat business model in more
locations. You're scalable,right? So that that's the next
layer. If I can justdemonstrate that, here's my.
Prototype. I just need abucket of money, pe type
money, to come in, and then Ican, then the business will
scale up. But I've done allthe hard work. I've proved the
concept for you. Bang, there'sthe next piece. You put all
(15:14):
those things in place, you'regoing to get a top, top model
for valuation for yourbusiness.
Scott Ritzheimer (15:19):
Absolutely, absolutely. So that takes us
to the next stage here andunlocking that value. So this
can be really intimidating fora lot of folks, because it has
a huge impact on your life inmany ways. It's the it's the
final assessment of how you'vedone over this years, in all
these years, in a few ways,and there's a lot of emotion
(15:41):
riding in all of this. So aswe're walking into this unlock
value stage, how can we managesome of the emotion, and what
should we expect?
Darryl Bates-Brownsword (15:50):
You've I think you've nailed it
there, Scott, there's a lot ofemotion involved. And yeah,
I've built this business overso many years, it's hard not
to be attached to it, and it'shard to separate. It's been
like when your kids go and getmarried, I guess, and or they
go and they leave home, whichthey're going to do as much as
you love having them at home.You love when they leave home
(16:11):
to give you a break, but atthe same time, you don't want
them to go because they're nowadults, and they're good
company, and they're with you,so your business is going to
leave home at some point. Sothe best thing we can do is
get a third party involvedwho's not emotionally attached
to our business, yeah, todrive the process and to drive
(16:32):
the negotiations. So whetherthat's an investment banker
and a CFO and a lawyer,they're the three that I would
always have as part of theteam, and I'd, in fact, get
the CFO involved two or threeyears before to start getting
the financials and thebusiness due diligence ready.
And even if you've already gota part time CFO in your
(16:53):
business, or even a full timeCFO, I would consider getting
a deal specialist CFO in tosupport your your regular
CFOs, because they've stillgot their day job that they
need. But you get a dealspecialist CFO in to get the
business specifically readyfor exit, because you don't
want anything to slow down thenegotiations. Once you start
(17:14):
talking deals, anything thatwill slow it down will
decrease the value of yourbusiness. So you've got your
CFO involved. You get yourinvestment banker. They know
the s and you want one thatgot specific knowledge of your
industry. Get them involved.They can do all the negotiate
negotiations on your behalf.And they're not emotionally
attached. They know themarket. They know what's
(17:35):
possible. They've got theexperience do all the
negotiations on your on yourbehalf. And the third one, an
attorney or a lawyer or asolicitor, depending on where
you're based, make sure youagain, get someone who's got
experience in deals to makesure that you're not taking
any unnecessary risks andyou're not going to be caught
out by the terms of the dealthat end up being more
(17:57):
favorable to the buyer, right?So they're three key players
you want, and that's where alot of people take shortcuts,
because they're expensive, butit's like L'Oreal. It's worth
it. There's an example ofbranding.
Scott Ritzheimer (18:14):
Love it. I love it. Now. What happens
here? And you mentioned thisin the very start of the
episode, you got a big wad ofcash inside a bank account
somewhere for most businessowners, way more than they've
ever had before. Yeah, andwith that bank balance comes a
huge responsibility to stewardit well. And so as we're
(18:35):
looking at that balance,thinking about turning it into
generational wealth, what aresome of the biggest mistakes
you see post exit, post salethat founders and owners make.
Darryl Bates-Brownsword (18:46):
Biggest one I see is when a business
owner has been building theirbusiness and building their
wealth steadily over 1520,years, and they may have an
IFA for a wealth manager orfinancial planner that they're
working with, and they've beenworking with all those years,
and because they've got a goodrelationship with them, they
(19:07):
want to be loyal to thatperson. Understand that we all
do. But just like when you'rerunning your business, your
suppliers and your clients,and especially if you're B to
B, your client, businessestend to be a similar size and
scale to you often work foryour most successful
relationships. So if you're a10 million pound business,
you're probably working withan accountant who is a 10
(19:30):
million pound or a $10 millionbusiness, because they're a
similar scale to you and scopeof operations, and they know
how to look after businessesof your size, sure. So you can
see where I'm going with this,if you, if you don't, you now
got a whole lot of money,because you've been really
prosperous in building thevaluation of your business,
and you got a big chunk ofchange, and we're now talking
(19:51):
that, yeah, you may have, youmay end up with 1020, 30,
hundreds of millions of of theproceeds that end up in your
bank account. You need to makesure that you're working with
a professional who's used todealing with funds and
investments of that size. Yes,after all those years of hard
work, you don't want to blowit by making the wrong
investments, by missing out onby paying too much tax, by not
(20:14):
protecting your generationalwealth, not looking after your
family members and doing theright things and getting your
wills, and you all of theother bits and pieces and
trusts, and you've just got toget someone who's an expert,
and I'm not an expert in thisarea, but you want to work
with someone who's got aprivate office, who's used to
dealing. They're not buyingretail investments and just
(20:36):
getting things off the shelf.These guys access to wholesale
they are. They're just workingwith private client, and that
amount of wealth to get theright advisors again is the
key here.
Scott Ritzheimer (20:50):
Yeah, yeah. Marshall Goldsmith nailed it
with what got you here won'tget you there. But what keeps
striking me as we're goingthrough this episode is, who
got you here won't get youthere, right? Most founders at
this stage have a brilliantteam around them. They're
executing. I mean, it's like,it's like clockwork. And a lot
of what goes wrong here is theteam that runs your business
(21:13):
is not the team you need totransition your business and
and that can be intimidating,but if you think about it, you
didn't know how to how tofigure out who you needed back
in the early days, right? Youfigured that, over time, with
the right guidance and theright focus, you can build
that skill for this stage ofthe your journey as well. And
(21:35):
and every one of thosequestions came back to a who,
right? It came back to who weneed in this process, and so,
so helpful. If you didn'tcatch that you're listening or
watching, go back and watch itagain, because you'll see that
the thread run all the waythrough and just make a list
of all the people you need toconnect with. And that's your
homework. But Darrell, beforeI let you go, because we've
got through these fivedifferent stages, but there's
(21:57):
a question that I ask all myguests that I'd love to ask
you, and then we'll make surefolks know how they can get in
touch with you, because I knowthey have questions, but my
question is this, what is thebiggest secret that you wish
wasn't a secret at all? What'sthat one thing you wish every
founder owner listening todayknew.
Darryl Bates-Brownsword (22:14):
The big one Scott is, and when
you, when you I didn't knowthis question was coming, and
I was sitting here going, Oh,what's going to hit me with?
Well, I know the answer, but Iknow the answer to this
straight away. The biggestsecret is, is kind of where we
started. This is we said, hey,look, only four out of five,
sorry, four out of fivebusinesses that go to market
don't sell, they don't end upwith a successful deal. And
(22:37):
that kind of is the biggestsecret. Because business
owners, the successfulentrepreneur. Business owners
that we're talking about arevery entrepreneurial.
Entrepreneurial people arereally optimistic people. And
all of them think, well, I'mgoing to be that 20% right? So
the biggest secret is theyjust assume that our business
is okay, we'll be able to sellit no problems and and they
(22:59):
don't do that any preparation.Because, like you're saying,
if we start preparing three,four or five, even 10 years
before we plan to exit, wemake sure we get to know the
right attorney, the rightlawyer to work with. We know
when to upgrade our taxperson. We know which m and a
consultant, broker, investmentbanker we're going to be
working with to that we geton. Weldon is an expert in our
(23:22):
industry, and and over theyears, we'll build a
relationship with them, andwhen we're ready, we can just
pull the trigger, and we canhave 100% confidence. And it's
not that we've done it before,but we've done all the
preparation that puts us onthe front foot, and we will
definitely be one of the 20%.
Scott Ritzheimer (23:40):
Absolutely, absolutely. Darryl, before I
let you go, I gotta know. Howcan we get in touch with you?
How can folks listening orwatching today reach out and
connect with you? Getsuccession plus,
Darryl Bates-Brownsword (23:50):
okay, the best way to get in touch
with me is through LinkedIn.You can see my name on the
screen. There's only one of meon the planet. It's good and
bad sometimes, but LinkedIn isthe fastest and easiest way to
get in touch with me, andyou'll get in touch from
there, you'll get through thewebsite and everything from
there.
Scott Ritzheimer (24:09):
Fantastic. We'll get that LinkedIn
profile in the show notes aswell, so you don't have to go
searching for it, although Iwish I was able to say that
you think like a name likeScott Ritzheimer, there
shouldn't be more than one ofus, but I'm a junior, so I
know the feeling that. Butanyway, Darryl, fantastic. I
love the simplicity of it andyet the power behind it, and I
(24:33):
hope it sparked something forsome folks listening today,
don't be one of the four infive. Be one of the one in
five, and follow these steps.Maximize the value of your
business, and you will be soglad you did reach out to
Darrell and the team. LinkedInnotes below, Daryl, thanks for
being here. It was a privilegeand honor having you on the
show. I really appreciate it.And for those of you watching
(24:55):
and listening today, you knowthat your time and attention
mean the world to us, I hopeyou got as much out of. This
conversation, as I know I did,and I cannot wait to see you
next time take care.
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