9 Things That Could Derail Your 9-Figure Exit
Whether you’re eying retirement, prepping a major professional pivot, or aiming to take your company to the next level, a nine-figure exit is a BIG goal that could change your life and the fortunes of your business.
But the BIGGER the goal, the more exacting your planning has to be. Just building a business worth upwards of $100 million is a tall task. To maintain that level of excellence through a successful sale, the CEO and supporting team will have to keep pushing the business forward while also steering clear of these nine common pitfalls.
1. Lack of a Scalable Business Model
The ability to scale effectively and efficiently with minimal incremental cost is an engine that drives significant growth and profitability. Even if your company has hit BIG by doing what it does best over and over again, buyers aren’t going to deliver a nine-figure exit unless you can demonstrate a path towards more: more customers, more units shipped, more service contracts signed, and ultimately, more revenue and profit. As you prepare for your exit, focus your resources on growth drivers, such as increasing retention rates, upselling, and automating previously manual processes.
2. Inadequate Succession Planning
Who’s running the company after your nine-figure exit? Are you planning to work for the new owners, either all-in or as part of a transition plan? Do you have a successor waiting in the c-suite wings? Will the sale create redundancies that could affect leadership structure at lower levels of the company? If you can’t see a next-gen org chart that will instill stability and high performance in the business after an exit, potential buyers won’t be able to see one either.
3. Overdependence on a Single Customer or Supplier
Any time one customer starts to exceed about 15% of your total revenues, you dramatically increase the risk to a potential buyer of your company. They don’t want to own a company that is so beholden to one customer–and neither should you. Same goes for a supplier. A war, hurricane, or pandemic could clog the supply chain and disrupt your business. We’re seeing this now with companies like Apple who are moving quickly to diversify away from manufacturing in China due to heightened geopolitical risk. Long before you start eyeing that nine-figure exit, diversify your customer and supplier base.
4. Neglecting Financial Management
Make sure you have pristine financial statements and high accounting standards. When you sit down with potential buyers, they want to see clean, accurate financial statements and a balance sheet that’s ready for battle. Inconsistencies, lingering liabilities, and poor record keeping are going to raise major red flags with the teams of attorneys and CPAs who will be going through your books. Clear up any issues before you start shopping your company.
5. Ignoring Legal and Compliance Issues
Any compliance issues you’ve been ignoring — or worse, sweeping under the rug — are going to face a harsh spotlight during a nine-figure exit. If your company isn’t exceeding the minimum operational standards for your particular industry, you risk damaging your reputation, and your value. And if you don’t have the systems and processes in place to protect your most valuable assets — including your team members and your intellectual property — prospective buyers will see smoke, mirrors, and liabilities instead of dollar signs. Comply, settle, and upgrade now, or it will be more expensive to do so later.
6. Failure to Diversify Product and Service Offerings
The widget or service that got you to $100 million isn’t likely to bring in the next $500 million all by itself. Your competitors are working on lower-priced knockoffs right now. Or, they’re finding flaws and limitations you’ve overlooked while profits were rolling in and creating a better widget 2.0. At the same time, even your best customers are always shopping around for something newer, more attractive, or more effective. You won’t get to a nine-figure exit if you’re unwilling to fire some new product test bullets and stay ahead of their needs.
7. Poor Company Culture and Employee Relations
Did your company grow to a nine-figure valuation because of your culture, or in spite of it? A drive for pure profit that’s led to accelerated employee turnover, cancel culture attacks, low employee morale, and a toxic work environment isn’t something potential buyers will just overlook. Smart investors and leaders know that, sooner or later, bad culture creates worse business. Even if it delays your exit plans, a cultural overhaul will pay dividends. And if your company is already a good place to work, listen to employee feedback that could make it great. You’re going to need buy-in and support from your best people to bring this sale across the finish line.
8. Not Hiring an Effective Investment Banking Firm
Always use the right tool for the right job. An investment banking firm can help with everything from identifying risk factors that could be harming your valuation to connecting you to potential buyers. But be careful, we’ve seen countless examples of companies who initially hired the WRONG investment bank, had to fire them, and see their exit plans set back for several years. Once it’s time to get into the nitty gritty details, the right investment bank will also be able to support your finance and legal teams and make sure you get the best possible deal structured the best possible way.
9. Insufficient Pre-Sale Planning
A nine-figure exit probably isn’t a goal for next quarter. It might not even be a goal for next year. Rush the process and your best-case scenario is still negotiating from a position that’s not as strong as it could have been and fighting for a valuation that’s lower than it could have been.
What CEOs can do, right now, is start doubling down on growth drivers that will make the company stronger whether it’s for sale or not. Remember, even if your company is not for sale, it must be salable. Test market that revolutionary new product. Look for ways to trim overhead, including outsourcing and increasing your digital footprint. Have those tough conversations with underperforming employees that you’ve been putting off. Get the best version of your business firing on all cylinders by the end of the year.
And then, as you prepare for your 2024 annual planning session, work with your CEO coach and your leadership team on a road map leading towards a nine-figure exit. That combination of optimization and preparation will clarify your timeline, your goals, and your vision for Making BIG Happen.
About CEO Coaching International
CEO Coaching International works with CEOs and their leadership teams to achieve extraordinary results quarter after quarter, year after year. Known globally for its success in coaching growth-focused entrepreneurs to meaningful exits, CEO Coaching International has coached more than 1,000 CEOs and entrepreneurs in more than 60 countries and 45 industries. The coaches at CEO Coaching International are former CEOs, presidents, or executives who have made BIG happen. The firm’s coaches have led double-digit sales and profit growth in businesses ranging in size from startups to over $10 billion, and many are founders that have led their companies through successful eight, nine, and ten-figure exits. Companies working with CEO Coaching International for two years or more have experienced an average EBITDA CAGR of 53.5% during their time as a client, more than three times the U.S. average, and a revenue CAGR of 26.2%, nearly twice the U.S. average.