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Heading for the Exit!

Heading for the Exit!

Question:

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 my friends experience has put me off. What do I need to do to make sure I don’t suffer the same pain?

Colin Mills of the FD Centre writes:

Your friends 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.

Thinking Ahead

I would always advocate an approach which “starts with the end in mind”. The more time you’ve got the better. You need to create your exit plan. Start by considering:-

Personal Aims

  • What’s the minimum value you want to realise?
  • What’s the minimum value you need to realise?
  • Do you want a total exit, or would you be happy with an ongoing involvement?

Business Aims

  • Invest a small amount of time and money in “up front” advice to understand what your business needs to deliver in financial terms to achieve the exit values for you personally.
  • 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 for the business, 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. Put yourself in their shoes.

Getting the Business in the Right “Shape”
The key message is DELIVER. Most exit plans fail, not because there is anything wrong with the plan, but management don’t execute plans effectively. To avoid problems later, you must enhance BUSINESS PROCCESSES, change ORGANISATION STRUCTURES where necessary, get the right PEOPLE on board, and deliver the right RESULTS.

The Exit

If you’ve thought ahead, got the business into the right shape, and delivered on those plans, the final exit process should be much less painful. Critical to this final stage is getting 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. Some pointers:-

  • 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.
  • Get your management thoroughly prepared to deliver great exit presentations – it can add millions.

Following the approach outlined above will avoid the problems your friend has faced, and hopefully yield a spectacular result for yourself!

Colin Mills is CEO and Founder of the FD Centre, the market-leading provider of part-time Finance Directors, to SME businesses in the UK.

 

 

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