Questions to consider when preparing your exit strategy

Every business is unique and as such a tailored approach is required in the preparation for an exit. However, there is some commonality in the work and discussions needed as part of this process. Here are some key questions to consider when planning your exit strategy:

How will you exit your business?

An exit can take many forms such as a sale to trade or PE, a management buyout or employee ownership trust, so it’s important to understand these options and the viability of them in the context of your own businesses. (We will explore each of these options in more depth in our next article.)

How important are you to the continued success of the business?

A common theme for businesses we work with is the dependency on the incumbent owner. It‘s vital to take steps well in advance of an exit to make your own role redundant to assure prospective buyers the business can continue to thrive without you. Spreading leadership responsibilities over an experienced and incentivised management team will reduce blockages to sale, add value and make the business a far more attractive target. It also opens the door to more of the different forms of exits noted above if you are not required to stay on after the sale. Keeping management incentivised can take many forms, be it bonuses, options, or shares; it's important to understand the alternative measures available and get them properly set up to work effectively for everyone involved.

What is the right value of your business?

Considering the value of your business alongside your needs and objectives is essential to managing expectations around an exit. While maximising its value may be your main objective, there are other factors to take into consideration such as the succession and protection of the business and its employees, and the continuation of its culture and brand.

What drives the value?

Identifying and cultivating key value enhancing qualities in your business ahead of a sales will lead to greater returns. Conversely, by identifying any value detractors, you have the chance to mitigate or cure these ahead of entering a sales process.

How is the value communicated and perceived externally?

Business owners must balance the future growth and required investment into the business against maintaining turnover and profitability. As such it is essential to get this balance right and understand what buyers value. Being able to demonstrate the measures taken to improve profitability and that these will continue post transaction will give buyers confidence in executing a deal.

Who is going to buy the business?

Consider what a potential acquiror looks like and how the company can best position itself to attract more potential acquirers and ultimately achieve a higher value. The buyers who are the best fit will also provide the best price, and so time spent in considering this will bring in rewards down the line. Having numerous potential acquirors in the mix allows for a competitive pricing process further pushing up valuations.

What do the different processes look like?

Take time to understand the steps involved in an exit, including the timeline and how it can be lengthened or shortened to fit in with your ambitions. Exits are demanding on both an emotional and time perspective and so performing as much of the heavy lifting as possible ahead of time can significantly improve the flow of a process.

Is the company ready for diligence?

To make a sales process as pain free as possible, your company should have clear access to all commercial contracts in a signed and complete form. Are there any legal, tax or other considerations that should be addressed and sorted before engaging with potential buyers?

Learn more about about what to expect during the exit process

We have distilled the key factors to consider when planning your exit strategy into a series of articles - view it below. 

Plan your exit strategy