As the leaves change colors and Autumn approaches, now is the perfect time for business owners to gather insights and reap the rewards of strategic exit planning. Discover how the Value Acceleration Methodology™ (VAM) can help you identify hidden value and prepare your business-owner clients for a bountiful future this fall.
The Value Acceleration Methodology is built around Three Gates, starting with the Discover Gate, where possibly the most critical deliverable in the entire methodology, the Triggering Event, resides.
Like raking leaves into piles, the Triggering Event sorts through a business owner’s personal and financial readiness, identifying where value is hidden in their business.
“The reason I chose the term Triggering Event to refer to this deliverable is that it triggers action 70% of the time. Inaction is your enemy and is often a root cause of poor transition success,” writes Christopher Snider, Exit Planning Institute® (EPI) CEO, in Walking to Destiny 11 Actions an Owner Must Take to Rapidly Grow Value & Unlock Wealth.
The Triggering Event consists of two smaller deliverables: the Business Attractiveness and Personal, Financial, and Business Readiness Assessment, and the calculation of the Profit Gap.
The Business Attractiveness and Personal, Financial, and Business Readiness Assessment is meant to identify the strengths and weaknesses of a business owner’s personal, financial, and business plans and what can be done to improve them as the owner works through the Value Acceleration Methodology.
The Profit Gap is how much money a business owner is leaving on the table each year. Calculated by subtracting the owner’s current Recasted EBITDA from their best-in-class Recasted EBITDA, the Profit Gap helps to drive action by putting a theoretical number in front of a business owner that shows how much money their business could make with the improvements suggested in the first part of the Triggering Event.
The second Discover Gate deliverable is the Prioritized Action Plan. This is as straightforward as it sounds. The Prioritized Action Plan drives the entire Value Acceleration Methodology forward. It includes a long-term plan, short-term goals, all executed through ongoing 90-day sprints.
The Prepare Gate is all about executing the Prioritized Action Plan in 90-day sprints, which are key to guiding a business owner through the Methodology. These sprints carry a business owner and their exit planning team through the Prepare and Decide Gates (and beyond).
There are two concurrent paths in the Prepare Gate: personal and financial planning, and business improvements. In those paths are two key players: the champion and the quarterback. The champion is accountable for whatever deliverables the business owner decides they need at the end of their 90-day sprints.
The quarterback is responsible for the day-to-day management of the sprint, and can, in some instances, also be a champion. In most scenarios, a business owner’s financial advisor will quarterback the personal and financial team, and the value advisor will lead the business improvements team, both of whom should be CEPAs.
For a deeper dive into the role of an exit planning quarterback, take our EPI Academy Course “Demystifying the Role of an Exit Planning Quarterback”.
The Decide Gate is where Value Acceleration comes to a head. After the end of the 90-day sprint, the business owner and their exit planning team meet to decide whether to harvest the wealth they’ve created through their work in the Prepare Gate or continue to drive value into their business.
“It doesn’t have to be a big deal. Just check in with yourself every 90 days. ‘How am I feeling? How is the staff feeling? Is it time or will it be time soon to consider a shift in direction?’ In doing so, you make exit planning present tense,” Christopher writes.
If the answer is “It’s time to exit,” it is time for the business owner to understand their exit options. For some, that could be a sale; for others, it could be an employee ownership program. If, instead, the answer is “I’d like to continue growing my business,” the 90-day sprints start back up, and the process continues indefinitely.
As Christopher writes, “Even if you decide to keep growing, you should be considering exit options every 90 days. Just dip your toe in and make exit planning present tense.”
Making sure that you keep exit planning present tense is at the core of VAM and helps prevent missed timing and a loss of potential value during the exit itself. In other words, don’t wait for winter to find out that your client and their business aren’t ready for an exit.
Interested in learning more about the Value Acceleration Methodology? Sign up for our Certified Exit Planning Advisor (CEPA®) certification program, where you will learn how to implement this proven strategy into your own practice.