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Maximising the success of a business exit

Some five years ago the government would not contemplate it, companies were not planning for it, and no-one was seriously predicting it. The ‘it’ in question is Brexit. Alongside Donald Trump as president, the once unthinkable referendum result made 2016 an unpredictable year. This has led to some considering a business exit.
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During the next five years, an estimated one third of SME owners have plans to retire, sell or pass on their businesses. Yet most have not begun to consider their options. If there are any lessons from Brexit, they must be: plan ahead, adopt a flexible strategy and be prepared for unforeseen eventuality. Only those sellers who anticipate each stage of the business exit process can attract purchasers willing to pay generously.

Most entrepreneurs only sell their company after years of struggle and effort. Deciding to sell is therefore very personal – probably the most important transaction they will ever undertake. However, our research shows that, like those who did not see Brexit coming, 70 per cent of bosses have no succession plan in place, nor is there a clear route mapped out through the business exit process. Failure to plan ahead can limit the options for a successful sale.

No captain leads a team onto the sports field without having a clear strategy of how to take on the opposition. Just like a winning team, operating a successful business depends upon a well-executed plan that responds to challenges along the way. The same applies to a successful exit: a clearly defined strategy combined with meticulous planning.

So how can you maximise your opportunities to get the right business exit that suits you best? There is no simple answer. But it can be done by using carefully targeted steps that end up with getting the best price on the right terms, at the right time:

Think ahead. The sooner you start deciding when you want to sell, the more likely you are to achieve your ambition. Ideally, a few years’ forward planning works best.

Investigate every type of potential purchaser by doing your due diligence on the available options: what is being bought, by whom and why? Identify potential buyers by their strategic fit and their ability to purchase.

Understand exactly what potential buyers may attribute value to in your business, then build value that they will pay for.

Identify any potential issues that could frustrate the process or impact upon value. Resolve these problems before starting the business exit sales process.

Focus on your business growth drivers while minimising any activities that do not enhance value for potential buyers.

Don’t limit your options. Selling to a direct competitor can rely too much on prevailing market conditions. Be flexible about potential buyers to achieve the most profitable exit.

Sell while your growth is accelerating. A flat revenue or profit forecast is unattractive to any potential purchaser so package the business attractively to increase buyer appetite. Always leave something on the table.

Carry out effective due diligence on your professional advisers. Make sure you feel confident they have relevant experience and know how to run a competitive bidding process, which includes: maximising competitive tension, enhancing valuation and delivering optimal deal terms.

Preparation should never be rushed. It has taken considerable time and effort to build your business. So do not leave your final reward on exit to chance.

There is a lot to consider before you sell: choosing the right time and finding the right buyer. Seek advice about how best to do this, focus your thoughts, set your objectives and outline your strategy, and allow yourself time to keep running your business. Taking a step-by-step approach really does work best: business sales are far more enjoyable and often more rewarding when they are planned ahead.

Mark Hardwicke is founder and managing partner at Invenio Corporate Finance

Image: Shutterstock

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As the champion of UK enterprise for 20 years, Real Business is the most-read SME website dedicated to high-growth businesses and entrepreneurs. Through daily news, unique insight and invaluable guides we are an essential resource for thriving businesses.

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