Seven Essentials to Prepare Your Company for an Exit
Nov 23, 2020
"There are no secrets to success. It is the result of preparation, hard work, and learning from failure." ~ Colin Powell
You have spent countless hours, sleepless nights, and won hard-fought battles to grow your company. You are the first person to laugh if anyone calls you an "overnight success." Success is the reward for bringing your vision into reality.
But do you know how to prepare your company for a successful transition in ownership?
It takes a different mindset to begin preparing your company for an exit event. While the following list is not comprehensive, we did find it compelling enough to share it with you.
Forbes's Robert Sher has compiled a list of seven essentials that business owners should implement to have a successful exit:
- "Build a strong, 'hair-free' business." Investors and buyers desire a company with as few operational defects as possible. For business owners, this means tidying up personnel issues, cutting off the company's failing areas, and tying up any loose ends.
- "Prime the business for growth, and prove it." One of the significant aspects that determine a buyer's level of interest and price offering is the potential for growth they see in the company. It is not enough to tell buyers that the business will continue to grow in the coming years; you have to show it through financial reports, industry trends, and other significant data.
- "Build a business designed to attract specific buyers." Just as businesses must tailor their marketing efforts toward specified target markets, business owners must stage their selling process to attract the right type of buyers. Business owners must look at industry trends to predict what buyers will want in the future and position their company to provide it in the here and now.
- "Create relationships with potential buyers." Buyers and investors put a great deal at stake when they invest in your company, so they need to know who you are to feel confident in their investment and potentially pay a higher price. Creating and maintaining relationships is vital to your business's selling, especially if you desire to gain the true monetary worth of the company.
- "Plan your life after exit." Making plans for a future in which you are no longer the owner of your company helps you become more personally invested in the business's selling. This perspective also protects both the seller and the buyer. There is a lower probability of the business owner backing out at the last moment or the buyer lowering their offer due to uncertainty surrounding the deal.
- "Run the sales process well." The process by which you prepare and position your company for sale can profoundly affect the price you receive for a business. Managing Director of Orion Capital Group Neil Shroff says, "Sellers must be explicit about what valuable competitive data should be disclosed, and when. All too often, investment bankers hand over valuable competitive data that should never be disclosed until the due diligence phase, or not at all." Although advisors can provide useful information and increase the company's selling price, the business owner is the final decision-maker and should ensure it remains that way.
- "Avoid post-sale headaches." Although getting the premium, hard-earned (and well-deserved) price for your company is extremely important, in the end, it comes down to choosing the right buyer for your business. Business owners should look for competent, passionate buyers. Many deals suffer post-sale litigation and disagreements, which can hurt the company. To avoid such issues, business owners should ensure that they choose the right buyer and help the buyer in transitioning the business to new ownership.
The Bottom Line
It may be time to sell your company. We have a proven and systematic process called Growth to Exit®. Over 12 weeks, we teach you what a buyer looks for inside a company and the steps you can take to ensure the buyer likes what they see. Pre-sale planning is essential to a successful exit.
Your company is the product. Growth to Exit® is the process. The Buyer is your customer.
Forbes: 7 Essentials to Sell Your Company at a Premium – July 12, 2012
THIS INFORMATION IS FOR GENERAL INFORMATION ONLY. IT SHOULD NOT BE CONSIDERED LEGAL ADVICE AND DOES NOT NECESSARILY REFLECT THE OPINIONS OF TSG PUBLISHING. YOU SHOULD NOT ACT ON INFORMATION RECEIVED FROM GROWTH TO EXIT® WITHOUT FIRST SEEKING ADVICE FROM YOUR LEGAL COUNSEL.