Theory of Constraints POOGI Part 61 Exit Planning Questions

We are continuing our series based on The Goal by Eliyahu M Goldratt and the Theory of Constraints. {This series was co-written with Brad Stillahn.}

Dr. Lisa: Let me start. We established in our last article that Exit Planning is consistent with Theory of Constraints, Lean and Six Sigma because business owners need processes that will increase profitability and business value. So now, let's help business owners check whether they are ready to exit, or what additional steps they would need to take to be ready.

Brad: First, a business owner needs to understand his or her objectives. Here's the question we need answered:

1. Do you know your exact retirement goals and what it should take in cash to reach them?

Dr. Lisa: Oh, I like it. That's the first step in Theory of Constraints (TOC) as well, understanding the objective. And then design a process to achieve the objective more and more. In a for-profit business, it's usually "make more money now and in the future". I know my answer for question number one.

Brad: Good. Now we need to know where we are in relation to the goal. So next we need to know:

2. Do you know how much your business is worth today, in cash?

Dr. Lisa: That's a much tougher question for me - business worth.  How do you find out?


Brad: It depends. If the business owner is close to exiting, a valuation by a Certified Valuation Analyst is recommended. But if you are just starting the exit planning process, a range of value can be calculated by a qualified CPA, and should be updated annually. Industry "rules of thumb" aren't good enough, and may be misleading. Pay a few bucks and get it done. Next, we need to know:


3.  Do you know the best ways to maximize the income stream generated by your ownership interest?

Dr. Lisa: I know the answer, it's TOC!!! There is no better way to leverage existing resources to maximize profitability now and in the future. Use the Velocity Scheduling System to do more with existing resources, and create an unrefusable offer-a Mafia Offer-to sell the capacity that's revealed.

Brad: Was that a commercial? Not that there's anything wrong with that...

Dr. Lisa: Yes, of course! Theory of Constraints is so powerful and I feel inclined to remind people of that fact. We helped 30 highly custom job shops improve last year -- substancially! A 100% success rate! What else could you have had these shops do with that amount of success?

And, we've had over 70 companies go through our Mafia Offer Boot Camp -- all creating great offers that they can use to sell more and increase the value of their business.

But I digressed. Let's get back to exit planning.

Brad: The answer to question three is where most business owners get stuck both in operating their business and with exit planning. If there is a gap between what you need (question #1) and where you are (questions #2), then you need to know how to close the gap (question #3).

.... to be continued (and completed) next week in POOGI #62

----------------------------------------------------------------

Want to have an Exit Plan? Go to http://www.scienceofbusiness.com/exitplan.aspx and take the first step.

----------------------------------------------------------------

Here's to maximizing YOUR profits (and selling price of YOUR business)!

Dr Lisa

(c)Copyright 2010, Dr Lisa, Inc. All rights reserved.