Preparing for Exit

Would you know how to handle a sudden and unexpected call to ask if you would be interested in selling your business? This is exactly what happened to a technology reseller who had not considered this before and had no idea what his business might be worth. Although interested now, he was very nervous about meeting a potential purchaser and his advisors. Nonetheless he felt he should at least explore the possibility. He was also anxious not to be led into selling too cheaply or being 'turned over'.

The client asked me for help, so we produced a preliminary valuation, I was briefed and prepped for the meeting and attended it with him. After the meeting I advised on the strategic and commercial shortcomings of the buyer's position and the likely impact on his final offer. I guided the client through the process of how to prepare for exit in his own time, and for the best sale price. I carried out an internal due diligence for the client which identified areas of weakness and opportunities for any possible future sale. We then developed an action plan for the client to use to address these matters.

As a result the client was positioned to sell on his own terms at a time of his choosing and to achieve full value for many years’ of hard work. An important lesson learnt!

There are several other motives for selling your business: perhaps wanting a lifestyle change; the business is outgrowing you; the business needs further investment to grow or you simply want to bank the value created.

Whatever your reason, you should begin by conducting a thorough review of your business as if you were the potential buyer.  To get the best price you need to get into shape.  The best-run businesses are always fit for sale but the value of your business is whatever a buyer thinks it is worth.  However, the things that make the business profitable and manageable for the current owner also make it attractive to potential buyers: solid strategic positioning, good management processes, managed risks and strong cash flows.

Seek out and minimise inherent risks: for example, over-reliance on a few customers, suppliers or even employees; no formal contracts; or potential litigation.  You should look at the value of the business in terms of future strategy rather than past numbers.  Generate competition, look outside your industry and be ready to control the timing of any eventual sale.

Getting the best price for your business is a strategic, marketing and sales exercise.  Your business must be growing, profitable, well-managed and measurable, in an attractive market sector and delivering cash first, and well-marketed and positioned for sale second.  You should also prepare, position and market your business so that the price you receive reflects the motives of the buyer.