Can an exit be straightforward?
A business friend of mine has just seen his company sale fall through for the second time in two years. I was planning to exit my own business within the next three years, but his experience has put me off. What do I need to do to make sure I don’t suffer the same pain?
A. Colin Mills of The FD Centre writes:
Your friend’s experience is not uncommon, but can be avoided by thinking ahead, getting the business in the right shape to maximise value and minimise sale problems, and making sure you get strong project management skills for the final exit process.
It’s a good idea to start creating your exit plan as soon as possible. Start by considering both personal and business aims. On the personal side, ask yourself what’s the minimum value you need to realise? Do you want a total exit, or would you be happy with an ongoing involvement? From a business perspective, get some ‘up front’ advice to understand what your business needs to deliver in fi nancial terms, to achieve the exit values you want.
Also consider the ‘shape’ of what your business needs to look like to maximise value. Potential buyers will need to see a clear vision and forward strategy, a strong, well-balanced management team (that isn’t too reliant on you), sound personnel policies and procedures, employment contracts that are up to date and in order, a good record of your customer contractual arrangements, an excellent health and safety record and no environmental issues. From a buyers perspective it’s about minimising risk. So put yourself in their shoes.
Having formulated your plan, you need to get the business into the ‘right shape’. Most exit plans fail, not because there is anything wrong with the plan, but because management don’t execute plans effectively. To avoid problems later, you must enhance business processes, change your organisation’s structures where necessary, get the right people on board and deliver the right results.
When it comes to the exit itself, it’s vital to get the right advisors on board to make sure you realise maximum value and get the right deal for the business and those who remain in it. Drive a hard bargain on exit advisors, but get the best you can. Make sure your exit forecasts are rock solid, otherwise they will be used against you to chip price. Also, get your management thoroughly prepared to deliver great exit presentations – it can add millions.
Following the above approach will avoid the problems your friend has faced, and hopefully yield a great result.