How To Start With The End In Mind

What is the reason that many businesses start-up? Generally because the founder has noticed a gap in the market for a product or service, and believe they can provide something better. It was this situation that drove Linda Bennett, founder of international shoe and clothing retailer, L K Bennett to start up her business in 1990 because she was frustrated by the poor manufacturing quality of women’s footwear in the UK.

Linda believed there was a gap in the market for shoes that were feminine and elegant, yet quirky and fun, and would appeal to a broad spectrum of different women. At that time having an exit plan was not at the forefront of her mind. It was to be 17 years later that Linda sold a 70% stake in the business to Phoenix Equity Partners and Sirius Equity, and became a non-executive Director in LK Bennett.

Whilst many entrepreneurs don’t start with the end in mind, it is beneficial to think ahead even at an early stage, in order to structure the business appropriately, both from a financial and organisational perspective.

Questions to consider at start up stage.

The important point is not to answer these questions below in relation to what the business is like on Day One, but where you want it to be at a specific time in the future e.g. 5 years time. Use your imagination to work out what your aspirations for the business are:

  • What is your business aiming to achieve?
  • What is unique about the business, and how it is adding value?

  • What size is it and what geographical coverage does it have?

  • What is its positioning in the marketplace?

  • Who are the competitors?

  • What are your clients saying about your products/services?

This will help you identify the size and scale of the business and if you are thinking of a trade sale as a possible exit route, then it can help you to work out who a potential buyer could be and why they would want to acquire your business. Is it the Intellectual Property you have, or the customer spread, or maybe the market share you have established?

Self Belief

Confidence and self-belief are huge issues that impact on your aspirations, as well as the level of commitment you are prepared to give, in order to achieve your goals.

Sometimes people initially lack the belief that they can grow a business, and therefore start small. Then before they know it, the business is growing and they have not put in place the structures and systems that can support growth. As a result, customer service tails off, or they are unable to meet demand.

It is at this stage, that I am often called in as a coach to help the leader. It initially appears as if it’s the business that is unprepared for growth, but often it is really the leader that is struggling to accept that the business is changing and therefore they need to change too, and take a more hands off role, and delegate more.

As Jim Collins, author of Good to Great says, “It’s not a great company if it can’t be great without you”.

Letting go and recognising that their leadership style has to change, can be a difficult process for the entrepreneur.

Financing your business

Once you decide ideally how big you want to business to be (this could be in terms of annual revenues, or geographical coverage, or market share) there are likely to be financial implications. For example, there is no point in taking most of the profits out of the business in the early stages if you intend to grow, as they could be used to fund future expansion.

Or if your plan is to find external investors, they are going to want to know their exit plan is in the future, which means they will want to know if you are thinking of a trade sale or IPO.

Make sure you have a clearly thought out business plan, even if it is just on one page.It’s the thinking process that is beneficial – remember the plan is just the output.

Exit plan

It can be unnerving to think about your exit plan so early in the start up stage of your business, but it is important to do so. If you were a property developer, and were building a house, you would know the size, the likely cost, and how you plan to sell it once it is built. So the same principle applies here.

Julie Gordon White, author of EXIT, suggests that your exit plan should begin 5 years before your ideal exit date. She recommends:

  • Take 6 months to complete a SWOT analysis of your business (strengths, weaknesses, opportunities, threats)
  • Plan the next 18 months to implement SWOT findings to increase profits

  • Focus on filing 3 years of profitable tax returns

Exiting a business is rarely a quick process, unless you are liquidating, and a buyer will want to see a positive trading position and future potential for them to add value. If your business is successful at an early stage, it is possible potential buyers will make an approach, and that can throw an entrepreneur off guard, if they have not even considered it, so be prepared from the start.

Sue Stockdale works with small businesses and corporate clients to help them achieve exceptional performance. She helps leaders with business strategy and mindset using her experience as the first UK Woman to ski to the Magnetic North Pole, representing Scotland in track and field athletics and runner-up in Channel 4’s Superhuman. Sue holds a range of coaching and assessment qualifications along with an MBA in Entrepreneurship and MSc in Quality Management. She is author of Kickstart Your Motivation, Secrets of Successful Women Entrepreneurs, the Growth Story and co-author of Cope with Change at Work and the Personality Workbook. For more details visit Suestockdale.com

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