I came across the term ‘Option Strategy’ in the forward to a book I read recently entitled ‘Built to Sell – Creating a Business That Can Thrive Without You’. The book was recommended to me by one of our Pabasso members, we often discuss with our members how to maximise the value of their businesses and where they should invest for the future.

I read the book because I have been and continue to be involved in a number of business exits and I thought it might enhance my knowledge.

I particularly liked the advice in the forward to the book to always run your company as if it will last forever and yet always strive to maximise its value. This approach then gives Business Leaders an ‘Option Strategy’ rather than just an ‘Exit Strategy’. In other words, if you build a great business with a long-term view you have many options open to you and you can exit or seek investment into your business at any time, in many different ways as and when it suits you and your team – without beating yourself up with an exit timetable.

Some business leaders get too focused on an exit before they have built a credible business.

The book is well worth a read, it does cover a lot of the points I covered when I knocked up a couple of videos in lockdown entitled How to Maximise the Value of your Business, Parts 1 & 2, which you can view on YouTube. In hindsight, the production is very poor but the messages are very valid!

The book is an informative, interesting and easy read in that it is written as a story, but I would caveat some of  the points made in the book:

There is a heavy focus in the book on creating a ‘product’ business neglecting services businesses and the value that can be created from generating great annual recurring revenues. Profitable well run businesses all have value, whatever they are selling.

There is an implication that implementing employee share schemes will make an exit more complicated, this can be the case but not if the schemes are well thought out and well implemented. They can be a great way to incentivise your team and maximise the value of your business, I’m a great fan.

There is an emphasis on incentivising key employees with bonus schemes rather than with shares incentives, both have a place but in both cases beware of the problem of ‘Golden Handcuffs’ as this can lead to locking in employees who become disenchanted that you have outgrown or have lost their mojo.

There is a suggestion that key employees need to be brought into any exit process early. In my experience, it’s better to involve as few people as possible in the process so as not to unsettle them as it is not inevitable that your business will sell. 

Once you start the process of trying to sell your business it’s naive to believe that nobody will find out you are in a process, but it is possible to create a ‘smokescreen’ to justify the unusual activity that results from embarking on a process. You can share that with the team so as not to unsettle them, I touch on some of these ideas in the videos. 

Once you are well into the process and it looks like you are likely to achieve a transaction, that’s the time to bring in those key employees that potential acquirers may wish to meet.

Build a great business with an Option Strategy and the world is your oyster!