- Subject
- Your business does not have a score
- Preview text
- It has four. And only the lowest one matters.
- From
- Kerry at The Exit Strategy Group
The governing constraint
Readiness is not one thing. It is three separate things, plus whether you are willing to decide anything at all.
The lowest of them governs. Which is why I will never show you a total.
We were not going anywhere.
My husband and I had spent the best part of 25 years on a business we had no intention of leaving. The plan, such as it was, involved younger partners taking it over one day at a pace that suited everybody. Nothing urgent. Nothing dated.
What we did have was a habit. The business was kept in a state where somebody could have walked in and taken it over on any given Tuesday. Systems written down. Numbers clean. Relationships that belonged to the business rather than to us personally.
It was not preparation for an ending. It was just how we ran it. Honestly, it started as a reaction to the first business, where I had learnt the hard way what unpreparedness costs.
Then somebody arrived with an offer we had never asked for, at a number well above what we thought the thing was worth.
And because of the habit, we could say yes.
That is the whole story. There is no clever bit.
The offer was not the achievement. Being in a position to answer it was.
Here is the part that took me another decade to understand properly. If that offer had arrived five years earlier, we would have said yes to a much worse version of the same conversation. And we would have told ourselves we did well.
Because the business was ready. We were not the same thing as the business.
You have already said this to me
I hear the same handful of sentences from owners with good businesses. Near enough word for word:
Four different sentences. One assumption sitting underneath every one of them: that readiness is a single dial and that theirs is somewhere around three quarters of the way round.
It is not a dial. That is the thing I want to give you this week.
Three pillars and the will
Readiness has three legs and a floor.
Business readiness
Could it run, grow and hold its people without you in it. Systems, management depth, revenue concentration, whether the key relationships belong to the business or to you personally.
Financial readiness
Do you know what it is worth today. And do you know the number you actually need for the life that comes after this. Most owners have a rough figure in their head with nothing behind it.
Personal readiness
What you do on the Monday. Who you are when the business is not the answer to that question. Whether the people at home have heard any of this out loud.
The will to decide
Not a pillar. The floor underneath all three. Whether you are capable of putting a date on something and saying it to somebody who will hold you to it.
Score each of them out of 25. Separately. Four numbers. And they stay four numbers.
Now here is the whole idea in one line. The lowest one governs.
Not the average. Not the trend. The lowest. Whatever your weakest number is, that is the version of your business that the world meets on the day something happens. And something eventually happens. Illness. A partner wanting out. A disagreement nobody saw coming. An offer too good to walk away from, arriving in a week when you are not remotely set up to receive it.
None of those things consult your average.
Why a total would be dishonest
Add those four numbers up and you get 61 out of 100. Average them and you get roughly 15 out of 25.
Both of those look like a business that is doing fine and has a bit of tidying up to do.
Neither of them is true. A total invites you to feel comfortable about a number that hides the thing that will cost you.
A 21 on the business pillar cannot carry a 9 on the personal one. They are not the same currency. You cannot spend good systems on knowing what you want your life to look like. And no amount of documented process tells your family what happens next.
This is also why every free assessment that hands you one number is doing you a quiet disservice. A single score is comfortable, shareable and it points at nothing you can work on this quarter. Four separate scores are uncomfortable and they point at exactly one thing.
So the rule, which I hold hard: report the pillars separately, name the lowest and never produce a total.
One pillar, ninety days
Once you know which one governs, the work gets much smaller.
Not a five-year plan. One pillar, one quarter, three or four things inside it. Then you score again, because the constraint moves. You fix the personal pillar and the business pillar becomes the lowest. That is not failure, that is the system working.
- Place it. Four honest numbers out of 25. Not the numbers you would give a bank.
- Name the constraint. Lowest one wins. If two are tied, take the one you least want to look at.
- Pick three things. Inside that pillar only. Ignore the other three entirely for ninety days. This feels wrong and it is the whole point.
- Re-score at the end of the quarter. New lowest, new quarter.
Readiness is not a stable state. It erodes the moment attention moves elsewhere.
That is why the re-score matters more than the first score. I have watched owners get the business pillar to a genuinely strong place and then leave it alone for three years while the management team they built quietly left.
The owner with the tidy folders
An owner rang me last year. A small team. Quality assured for decades, everything documented, the sort of business where the folders are real and somebody actually reads them.
He knew he was good at this. He said so. And he was right.
On the business pillar he was strong. Genuinely strong, not self-reported strong.
Then, about ten minutes in, he mentioned almost as an aside that his operations manager had moved shifts that week for family reasons, so the previous one had been pulled back in to cover, so the whole schedule had gone sideways.
And then this, which I have thought about ever since:
The documentation was excellent. The depth underneath it was one person deep.
His financial pillar was softer than he thought as well. Two years of paying the bills rather than making money, after a move to bigger premises took the rent and the equipment payments up together. He knew the profit figure from three years ago much better than he knew the one from last month.
And the personal pillar, which nobody had ever asked him about, was the lowest of the lot. He was in his sixties. He was happy to keep going for another few years and then stay involved for a while after that. When I asked what the after looked like, there was a pause and then a version of "I haven't really thought about it".
He never completed a scorecard, so these are my numbers rather than his. If I had to place that first conversation, the business pillar was up around 21, the money somewhere near 19, the will maybe 12. And the personal pillar was a nine.
Average those and you get a business that looks about fifteen out of twenty-five. Reasonable. Bit of work to do. Nothing urgent.
Which is exactly the reading that had let him sit still for four years.
The nine is what he would have met if his health had made the decision for him. Not the twenty-one. The nine.
So that is what we worked on. Not the operation. The operation was fine.
Fair questions
"My accountant looks after this."
Keep them. I work alongside accountants and I would not want a client who did not have a good one.
They hold the financial pillar and they hold it well. Nobody is holding the other two. Nobody around you is paid on whether you get an ending you chose. That is the gap.
"Surely the business pillar is the one that matters."
It is the biggest. It is where most of the value sits. It is almost never the one that governs in the businesses I see.
The business is the easy part. Most transitions that come apart, come apart on the owner.
"What if all four are low?"
Then you still only work on one. Four low numbers is not four projects, it is one quarter of work on the lowest and a re-score in ninety days.
Trying to lift all four at once is the most common way this stalls.
Four numbers on the back of an envelope
Twenty minutes at the kitchen table. No spreadsheet.
- Write the four headings down the page. Business. Financial. Personal. Will.
- Give each one a mark out of 25. Be harder on yourself than feels comfortable, because the honest version is the only one worth having.
- Circle the lowest.
- Write one sentence saying what the next ninety days does about that one thing.
- Do not add them up.
If you cannot mark the personal one at all, that is your answer and you have just saved yourself the twenty minutes.
Where this sits
Naming the constraint is the second step of six. It is the one everything else hangs off.
Four states along the curve, three pillars that decide which one you are in and the will that decides whether you ever move. You are placed where the business actually is, not where you intend to be.
Which is the long way of saying the same thing I have been saying all issue. You get placed where the business actually is, not where you intend it to be by Christmas.
Get placed properly
The envelope version above is worth doing today. The Readiness Scorecard is the proper version of it.
Twenty questions, six or seven minutes, no yes-or-no answers. Three pillar scores out of 25 and a Will score out of 25. It names the one that governs.
There is no total at the end. There never will be.
Always be ready.
Kerry
More at readyforexit.com.au. If you know an owner who has been almost ready for three years, forward this one to them. It is the kindest thing you can send someone who is quietly stuck.