What are the most important things a home care agency owner should be thinking about now if they want to sell in five years?
The decision to exit is only the first step in a series of critical decisions you as an owner must make. How you prepare yourself and the business for exit plays an important role in determining company value.
Areas to focus on to prepare your exit:
- Your personal financial goals
- Personal Life and Social Goals
- Involvement after exit
- Employees well-being
Your personal financial goals
Many business owners talk about their business like it’s one of their children. Ask virtually all parents, and they will state that they can’t assign value to their children. Similarly, some owners believe their business is invaluable and think of the highest number they will get offered for the business rather than the lowest they are likely to accept. I encourage you to define a “minimum number” as the lowest number you will accept to exit the company with no future regrets.
Owners who have thought about their minimum number build a business that is 5-6% more valuable. What’s interesting is the simple act of thinking about the number appears to help the owner prepare for the exit and to have a more valuable company.
Personal Life and Social Goals
Most home care owners invest most of their time into their business, sometimes spending upwards of 60 hours a week working in their company. Especially in the beginning. They become friends with their employees, inviting them into their homes and to milestone celebrations like their children’s birthday parties. Business owners who are aware of how the exit will impact their social circle appear to have a slightly more valuable business. It is great to be close to your employees and focus on making them happy and part of something bigger than themselves. The trick is to make it about the company and not you personally or you may set them up for a difficult time with a new owner.
Involvement After Exit
Many home care owners think that the exit will be simple. Like selling a house, they will hand over the keys and get a bag of cash in return. Exiting a business is very different from selling a house. The more an owner is willing to remain involved in the business after exit, the more valuable the company appears to be. An owner who is willing to accept any option beyond handing over the business and walking away will have a 4-5% more valuable business. There seems to be a premium paid by the buyer for an owner to stay involved through the transition process.
Employees’ Well Being
Successful home care owners often wonder about their employees’ future life—career, family, and personal goals. They wonder how their exit will impact the lives of their employees’. Some business owners wonder how the buyer will treat their employees once they take over. Some owners may plan how they will thank their employees, while others will take steps to negotiate with the buyer to look after their employees.
Having a plan and thinking through the employees’ well being appears to lead to between a 17-21% increase in business value, regardless of if they have shared their exit plans with their employees.
In closing, as business owners prepare for exit, how they approach these four areas can drastically impact business value. If all four areas are addressed effectively, owners can expect a 36% increase in the value of their business overall.