5 Steps to take when Exit Planning

Author Phil Shearing, Business Partnership

For Business Owners, when it comes to selling your business, preparation is key. Once the decision has been made to sell the business, you, as the owner have two choices:

  1. Go to market immediately and see what someone will offer
  2. Seek advice and ensure you receive can achieve the deal that is right for you and your family. This can be the best value or be a combination of price and a buyer who will look after the legacy (the team and business) you’ve invested so much time and money in building.

The first step to take is to seek a trusted advisor to help you. They should demonstrate an ability to assess your business to provide a valuation based upon your business and not just average industry values. This is why Business Partnership Corporate provide a comprehensive report outlining how your business scores against the 8 key drivers of value. This is starting point in building your Exit Planning.

Once you know what is holding your business value back you can develop an action plan and set out the main priorities and timescales for achieving the goals. Be sure to break the goals down into manageable actions that can be completed and provide that sense of progress.

As you would expect, financial performance is key, e.g. if a business is only breaking even it is unlikely to achieve significant cash value at completion. So, focus upon increasing profits. When did you last improve prices? When was the last time you reviewed your costs and systems (new software is being launched daily that could improve efficiency)? Early planning is key, as a buyer will be dubious if there is only one year’s improvement shown, they will pay more if they can see the improvement sustained over 2 or 3 years.

A buyer will expect to see accounts prepared in a timely manner by a reputable accountant. Also alarm bells ring when the accountants are changed. You need to avoid creating an element in the numbers. A set of audited accounts, if you are large enough, gives a prospective purchaser an even higher level of trust and removing doubt usually translates into a higher multiple potentially being offered.

Another key point is do not be distracted by the sale. If the business suffers because you are focussed on selling, the buyer will likely see you as key to the business post sale. This can lead to offers with earn outs and increased risk for you. So, it is important to ensure the business has good systems in place that allow your team to run the business. Your team need to remain engaged and will soon start to notice if your behaviours and actions begin to change (delay decisions, not recruiting etc).  Again, this is where your trusted adviser can work with you to hold you accountable.

The above examples as just part of the menu of things to consider as your plan an exit that will achieve your goals.

Phil Shearing is a Regional Partner with Business Partnership, a business brokerage with 40 years’ experience of selling business and offices all over the UK.

5 Steps to take when Exit Planning