8 Key Actions To Prepare Your Business For Exit

At some stage, every entrepreneur and business owner has to realise an exit from their business.

The most important thing is to maximise the business value when you sell your business. I have already written about the key exit strategies in an earlier blog http://bit.ly/1eDQ4DF

Whatever strategy you choose, it is important to action the following key points in order to maximise the exit value of your business.

1. Ensure your books are up to date – having up to date accounts and financial statements are vital for any potential buyer to evaluate the state of the business. Make sure you have audited accounts for the last 3 years as this will help greatly and the benefits will outweigh the costs.
2. Understand your business and profitability – know your EBITDA and ensure that you also know the list of non-operational expenses you’re putting through the business, which a new owner may not. For e.g. you maybe leasing your personal car through the business. Also make sure that you know what exceptional cash items the business incurred over the last 3 years that won’t be incurred again, since future cash projections will be taken into account in the valuation.
3. Get a Finance Director – even if it’s part-time, get your self an experienced FD who can guide you from the start of the process and help the business improve it’s profitability.
4. Prepare financial projections for the future – if you get a good FD, they should be able to help prepare these for projections profits, cashflows and balance sheet so that potential buyers can evaluate what returns their purchase price would generate. Buyers always base valuations on future potential rather than just on past performance. Having an ongoing Business Plan would be a great help.
5. Ensure all legal paperwork is up to date – review customer and supplier contracts, leases, employment contracts, official company documents and any other legal papers to ensure there are complete and up to date and ready for legal due diligence by a buyer.
6. Succession planning – ensure that a management team is in place and can manage in your absence. Some corporate buyers may not need this if they have enough senior manpower but this may not be the case most of the time.
7. Appoint your advisory team – start to meet with lawyers and accountants who have business sale experience since any due diligence process can be long-winded and arduous and you need a good team on your side. You may also need an intermediary to help sell the business. Meeting a few will help determine the team that you want on your side and ensure they have the time to give to your sale.
8. Consider your tax position – make sure you get advice on your personal tax position even before your start the process. Of course you will need an idea of the value of your business sale and a good tax advisor will be able to advise the best way to structure a sale given your personal tax position.

Selling a business can be even more arduous than starting one and there is plenty to do. It also takes time, so expect that a sale process may take 12 months or more and also involve aborted sales on occasion.

So it’s very important that you don’t lose focus on the business since that would directly impact on the value of your business sale. Having a good FD whether part-time or not would help since they can get all the key actions done whilst you focus on the business.

[Contributed by Asoka, Independent Finance Director and Management Consultant based in London. He works with growing companies as their part time Finance Director and is the Founder of AKCA Consulting, which helps companies improve their financial health.]