Need an exit strategy? Tips to prepare your business for sale

Aja Stuart

In the frenzied excitement of the startup process often the last thing that’s thought about is how the business will end. But they usually do, and hopefully yours will be so profitable you will be trying to sell it.

Neill Whitehead, of Saxon Klein, knows first-hand how a successful business sale feels. In 2008 he helped sell PC Tools, for a very tidy sum. Now he advises other entrepreneurs and fast-growing companies how to achieve their own successful business sales.

When it comes to preparing your business for sale, Whitehead has a five-point game plan.

Allow enough time to exit

Whitehead recommends at least 12 months, but the more time the better. “If you formulate your exit strategy up-front, then you give yourself a much better chance of a successful exit than if you start the sales process today without any preparation,” he says.

“If you were building or renovating a house now and knew there was a good chance that you might be selling it in say 12-24 months’ time, then that knowledge may influence some of your choices today. Good decisions about what work you carry out now can have a big bearing on the sales price you achieve down the track.”

Undertake a “buyer discovery” process

“Potential buyers of a business may be an existing supplier, customer, or competitor to a business. They may also be a potential entrant to the industry,” explains Whitehead.

Once you’ve identified your potential buyers you then need to flesh out the reasons why they would want to buy your business. “This involves a deep understanding of their operations and potential reasons for purchase,” says Whitehead.

“You will be surprised what you can find out just by talking to people. If you can create an ongoing dialogue with a range of people including their sales and marketing folk, product development team and C-level staff, you will get a good feel for things they are interested in and where they want to head.”

How many potential buyers should you have on your radar? “A good guide is at least 40,” says Whitehead.

Rank your list of potential buyers

“Once potential buyers have been identified, it helps to really understand their reasons for acquisition and then grade them as A, B or C in terms of attractiveness, because your business will be worth more to some potential buyers than others for a whole host of reasons,’ explains Whitehead.

“The ideal scenario is one where there are at least two potential buyers with deep pockets that are really interested in your business for strategic reasons.”

So, what makes an A-lister? “An A-list potential buyer might be someone who has deep pockets and a history of acquiring similar businesses and has strong strategic reasons for acquiring your company.”

Look at your company through the lens of potential buyers

Whitehead recommends assessing the fit between a buyers list of possible reasons for purchase and your business as it stands today.

“This information feeds into your planning discussions over the coming 12 months and may even lead to changes in sales and marketing activities, product road map, operations, IT systems and procedures, locations and/or staffing,” he says.

“It can be risky doing this, so you need good judgement when it comes to deciding what products or services you might add to a business going forward. When you look closely at a business though, you may find there is a surprisingly large number of things you can do for negligible additional cost which might make your business more attractive to a number of buyers.”

Get on the buyers’ radar

Your potential buyers need to know about your capabilities for about 12 months before you approach them for a sale.

“There are lots of practical ways to get close to the right people in a company which gets you on the radar,” says Whitehead, “and then maintain the connection with them in such a way that they have a good understanding of your capabilities and potential and will act as an internal ‘sponsor’ when it comes time down the track to negotiate a deal.”

Industry conferences, press releases, and mutual connections are all useful ways to get your message through to the right ears.

Whether you are just starting out, or gearing up to sell your business in the near future, planning your exit strategy well will make a big difference to that final figure.

Aja Stuart

Aja is Sydney-based writer and serial entrepreneur. She regularly writes about small business, entrepreneurship, and health and wellbeing. Her latest entrepreneurial adventure is yeahmama.co.

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