You have decided that it could be time to sell your business. Now you need to put an exit strategy in place, the key to which is preparation, as John Warren, Co-Founder of Matchbox Associates Limited, explains.
When is the right time to sell the business you’ve invested so much of your time and energy to build? This is a question that every business owner will have to confront at some point for any number of reasons…
Maybe it’s time to retire and enjoy the next stage of your life free of the pressures of running a business? You’ll know when the time’s right, best case scenario being when your business is on the up with growing profits, employment opportunities and new markets to enter.
Maybe you feel like you have taken the business as far as you can – and there’s an offer on the table from a potential buyer, from inside or outside the business, who will preserve your legacy and take it to new heights?
Or it could be that you need to free up some capital to invest in a new opportunity that you’ve identified? One that is low risk and will increase the fortune you’ve already created.
Whatever the reason, you’ll want to get the most value for all the money and hard work you’ve put into your business when the sale goes through.
It can be hard to let go. Especially when you sell something that’s personal, that’s been in the family for years, and to which you have an emotional attachment − meaning it can sometimes be difficult to put an objective value on it. But when you’re a buyer, it’s more straightforward, as your decision will usually be made on a more pragmatic basis.
Preparation is key to a sound exit strategy
Selling a business is a bit like that. A buyer will look at your business coldly and dispassionately and offer a price that’s based on what it’s worth to them. That’s typically focused around how much income can be predicted, with what degree of certainty, and how much risk is in the investment. So selling your business − with a sound exit strategy − is all about identifying the issues that could potentially impact adversely on value and fixing them well in advance of the sale. Essentially doing everything you can to show that your business is an attractive acquisition.
There are some elements to the exit strategy that are focused specifically on the sale, and these need to be given close attention and due diligence. Like, for example, ensuring the business can function effectively once you’ve left, and making sure you have a clean set of books and no awkward customer or supplier issues the buyer will have to deal with.
While there are other elements of your exit strategy that are simply about good management − typically ensuring that you have a management team that’s competent, knows its job and is used to taking key decisions.
The challenge is wrapping all of these elements up in a clear and cohesive plan so your buyer doesn’t need to search around for detail and the sale goes through as cleanly as possible.
Preparation is the key to a sound exit plan. Detailed planning should start early if you want to ensure you achieve the best value for your blood, sweat and tears, well before you embark on the sale.
If you'd like to find out more about the considerations around selling your business, passing it to family, management buyouts or any other aspect of your exit, we’re delivering an Exit Strategy Workshop on Friday 21 July 2017. Book your place here: http://www.businessgrowthhub.com/events/2017/07/exit-strategy-july