If you are wanting to exit your business in the next 5 years, and you want to maximize the value of your exit and ensure your legacy, then you need to be diligently working your transition now, if you aren’t you are taking a huge risk. Strategically, to sell for a premium, take Wayne Gretzky’s advice, “skate to where the puck is going, not to where the puck is”. For business, the puck is rocketing toward sustainability and ESG (environmental, social, governance) conscious businesses. You can add significant value to your sale price if your business has embraced and lives the ESG conscious business principles. ESG is the key to attracting money, clients, the best talent and to earning a social license to grow. You can also use it to differentiate your business so it stands out like a shiny penny (that gets picked up) in the over-heated M&A market.
Interestingly, ESG may not be as big a transformation as you’d think. My experience is that most of the small-medium business (SMB) owners I know run their businesses, very consciously. They care about and look after all of their stakeholders; their employees, their customers, their suppliers, their communities, the environment, operating with integrity and high ethical standards. This is proven by the fact they typically pay themselves last after they’ve taken care of everyone else. Ironically, they are personally living the ESG conscious values, but don’t “brag” about it, so they aren’t seeing the full benefits. Getting the ESG story out and public is going to be crucial, so they need to reframe their perspective from “bragging”, to being a role model and challenging other businesses to match their high ESG standards. It is when their stakeholders sing their praises, telling their ESG story for them, they will define an ESG brand and image much better than a company can for itself. Which is how they can get great ESG scores that make them much more attractive and drives a significant premium for the business.
So, if you want to sell your business for a premium, then you need to ESG transform it well in advance to be able to tell the story that will give you the most options, and the best price.
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