In any case where you are planning an exit, you must allow sufficient time to prepare the company for the transition, or to maximise its market value if you are planning on a sale. In most instances we advise applying an exit strategy that runs over a minimum course of 2 years. If you are setting up a business for the purposes of a future sale, it is a good plan to have a strategy in place from the beginning, and we can advise on the right processes to create such a foundation for a successful future sale.
Preparing the Business for your Exit
Regardless of how you choose to exit your business, preparing for the change is critical. When looking at any form of sale, an optimal price will depend upon how well the business has performed in the period approaching the sale. Ordinarily a business valuation takes into account the activity over a retrospective period of 3 years, so having this period to focus on getting the business ready for sale is a big advantage. Again it is important to plan ahead as far as possible - as being able to consistently demonstrate good financial standing, profitability and stable operation throughout this period will improve the prospect of a sale and the potential value of the business. By planning ahead you can minimise the risks associated with a disposal and retain a greater degree of control over the disposals process. We can assist you with this preparation by undertaking a Due Diligence Audit of your business in advance of a sale.
Moreover, you will also need to consider the management of your business going forward. If your departure will result in a change in management, the responsibilities should be transferred gradually in accordance with a full succession plan to guarantee a smooth departure that also leaves the business in a strong position after your departure.
The circumstances of exiting a business are different for everyone, so when we work with you on your exit strategy, we will advise on the preparations that will best serve your objectives.
Advice on Selling
A successful sale is reliant on value, expertise and commercial awareness. If you plan to sell your business then you will need to get a fair and accurate valuation. Over or undervaluing a business will affect a sale, so it is critical that all angles are covered - from obvious areas such as fixed assets, through to areas that are significantly harder to measure such as Intellectual Property, staff experience and potential for future growth. We work with financial and tax advisors to strengthen the business as a prospect for potential buyers and can recommend the most efficient way in which to carry out a sale by providing advice on both share and asset sales. This is an that can often reveal opposing objectives between buyer and seller and one where negotiation skills, ability and experience are worth a great deal.
Whilst the word ‘exit’ does sound very final, the truth about a good exit strategy is that it is gradual, well planned and involves a period of transition. In most circumstances you will maintain involvement in the business during your exit and in some sale agreements this can formulate part of a contract. It is important to remember that the expertise you have will likely be of great value to the new management or owners and they will be keen to make use of it.