How Do You Build a Business with an Exit Strategy in Mind?

How Do You Build a Business with an Exit Strategy in Mind?

podcast scale -impactful insights Jun 06, 2024

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Today, we’re diving into a topic that might feel a bit premature when you’re in the growth phase of your business: building a business with an exit strategy in mind. It's akin to raising a child; you don't think about graduation day when you're engrossed in the early milestones, but being prepared for that eventual day is crucial.

The Unexpected Truth About Entrepreneurship

When you're immersed in the hustle and bustle of growing your business, it may seem inconceivable to consider its eventual sale or separation. Comparatively, it's like holding a newborn and thinking about their future graduation—it's far off, but inevitable. Your life is finite, and thus, you won't be running your business forever. And that's precisely why it's so crucial to start building a sellable business today, even if selling isn't yet on your radar.

The key here is *preparation*. Building your business so that it could potentially be sold ensures that it runs efficiently, even without you. More often than not, business owners don't anticipate the reality that they can't work indefinitely. Plus, passing down a business to the next generation isn’t always a viable option; your children might not have any interest in taking the reins, and employees may be content in their current roles. The sad alternative is shuttering the business altogether, something most entrepreneurs wish to avoid.

The Blueprint: Systems, Processes, People

A pivotal strategy to build a sellable business is focusing on your systems, processes, and people.

1. **Systems and Processes:**

Documenting your methods and establishing reliable systems is crucial. These processes need to be robust enough so that anyone stepping into a role can keep the business running seamlessly. Think of it this way: could someone new manage your operations without disrupting the business? If yes, then you’re on the right track.

2. **People:**

The value of your employees can’t be overemphasized. However, you must ensure that your operations aren’t solely dependent on any one individual. This means having comprehensive training programs and documentation that empower new hires to step in with minimal disruption. This “plug and play” model makes your business far more attractive to potential buyers.

Recurring Revenue: The Golden Ticket

Another element that significantly enhances the attractiveness of your business to prospective buyers is recurring revenue. Recurring revenue streams mean less effort in drumming up new sales consistently. A predictably profitable operation is immensely appealing to any buyer because it symbolizes stability and less risk.

My Vision: Selling Processes, Not Clients

As a CPA and business owner, my vision is somewhat unconventional. I don't believe in selling clients as mere commodities. Instead, I envision creating a fractional CFO firm that goes beyond the typical client-accountant relationship. By offering exceptional service, documenting processes meticulously, and meeting client needs precisely, I can offer something immensely valuable: our recipes for success.

These methods and processes can be licensed, franchised, or sold, allowing others to recreate our success independently.

The Franchise Model

Modeling this after how franchises function is an exciting concept. Essentially, a franchise figures out how to deliver top-notch service consistently. It then provides a playbook to prospective franchisees, ensuring they can replicate success. This method reduces risks and increases the likelihood of consistent quality across various locations.

Imagine a franchise model for a fractional CFO service. This system would include everything from our tech stack, pricing structures, client interactions, to specific monthly deliverables—essentially a complete recipe book. Future business owners could then leverage this branded, well-documented process to scale their own successful practices.

Small Steps Towards Big Goals

While this might sound like an overwhelming or distant goal, small actions taken daily can gradually push you closer. Whether it's refining your documentation processes, enhancing client interactions, or making your business operations more transparent, each action contributes toward building a sellable business.

So today, consider what steps you can take to build a more efficient, self-sustaining, and eventually sellable business. Even if selling is not in your current plans, developing a business ready for such a possibility ensures its growth, sustainability, and legacy. It's never too early to start thinking ahead and making smart, future-focused decisions.

Join us in the next episode as we delve deeper into entrepreneurial strategies, all aimed at helping you “keep what you earn.” Until then, remember, small actions today result in great outcomes tomorrow.

What you'll hear in this episode:

05:30 Limiting clients to provide attentive first-class service.
07:55 Focusing on small actions for future success.

If you like this episode, check out:

Breaking Down CFO On Demand

Stop Trying to Scale Everything

The Steps to Selling a Business


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The information contained in this podcast is intended for educational purposes only and is not individual tax advice. Please consult a qualified professional before implementing anything you learn.