How to improve your chances of a successful exit

Exit planning checklist

The owners of small businesses are very likely to make mistakes when the time comes to selling their business. This is not at all surprising – most of us learn from experience but most owners of small businesses have never sold a business before. However, this is one of those situations where “learning on the job” is definitely not recommended!

Check you and your business against the points below to help improve your chances of success.

Exit planning checklist:

1. Accept that the time will come when you, the owner, will no longer be willing, or able, to run your business every day.

2. Work out what you want to do next – and how much money you will need to fund retirement or take on your next project.

3. Think about what the business might look like when it is no longer yours. How much you care about what happens after you leave has a major influence on your choice of exit options.

4. If there are several shareholders expect each to have a different expectations and timescales – so you will need time to discuss and agree an exit strategy that all will find acceptable.

5. Give yourself enough time! For example . . .

a. Anticipate issues likely to be discovered by due diligence and correct them in a timely fashion.
b. Key skills, client and supplier relationships, specific expertise and market knowledge need to be “in the business” – not just exist in the minds of the owners.

6. Review basic issues of “good governance”. Such as . . .

a. Is the Shareholders Agreement still appropriate to the needs of the business and its directors.
b. Is there evidence of a formal decision making process at board level – e.g. for new hires or capital purchases?
c. Does the board regularly review business risks associated with continuing and, particularly, new operations.
d. Are you compliant? E.g. in areas like H&S, HR or Terms of Trade
e. Company reputation and customer satisfaction are being actively monitored.

7. Is there evidence of “good business practice” . . . such as:

a. Processes are documented and subject to continuous improvement.
b. Business plans, operational budgets, management accounts are in place and key are metrics monitored.
c. There is clarity about structure, accountability, roles and responsibilities, and pro-active succession planning for key personnel.

8. Understand your options. Learn about how a trade sale works, get briefed on how your business might be “valued”, understand how to that valuation could be improved – and check out the length of time required to complete a typical transaction.

9. Expect the process of marketing the business, dealing with potential buyers, responding to due diligence activities – and all the many associated tasks – to consume a great deal of time. And remember, your key task throughout this activity must be to keep the business moving forward strongly in all areas.

10. Have an exit strategy in place and review it regularly – every year or two. Then, if it happens, you will know how to respond to an unsolicited offer to buy your company – and not be in a blind panic!

Remember, an exit strategy is not a foot in the grave – rather it is the beginning of something new!

If your business is not shaping up well against this checklist or you have any questions and wish to discuss your responses, please call us on 0208 895 6189 or contact us via the form below – without obligation.

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