Maximising Your Exit: A Strategic Guide to Selling Your Business

by Richard Jacobs 29th of April, 2024

Maximising Your Exit: A Strategic Guide to Selling Your Business

When the time comes to transition away from your business, the pathway you choose can significantly impact your financial future. Through years of brokering deals and guiding business owners through their exits, I have distilled essential strategies into a guide that ensures your departure is not just successful but financially rewarding.

Below are some of the most common tips

1. Planning pays off

It goes without saying, embarking on an exit without a well-thought-out plan is like setting sail without a map, compass, rudder, and sails.

It is imperative you start planning your exit years in advance to enhance your business’s value. In fact, my mantra is you should plan your exist strategy from the day you start in business as this foresight allows you to exit on your terms and you will always be ready to exit at a time when market conditions are most favourable to you.

2. Value systems

Streamlined operations are extremely attractive to buyers, as it signals to them that the business can thrive despite who is the owner.

I encourage my clients to ensure their systems, from customer management to fulfilments to inventory, human resource, and cash management are efficient, effective, and more than anything else well documented. Not only does this provide a smoother transition, but often significantly increases the value of their business’s market price.

3. The power of slight changes

Simple, cost-effective improvements can significantly enhance your business’s appeal. I have had clients who have taken my advice to do straightforward things like simply updating their website, putting a fresh coat of paint on the premises, or improving staff customer service training.

These little tweaks which were low cost to the owner create a stronger first impression, and we believe added substantial value at no significant cost.

4. The importance of financial transparency

Clear, organised financial records are crucial for a sale. In my experience quite possibly 90% of prospective buyers will first look at your financials to start their process. If there are inconsistencies or unexplainable changes in revenues or expenses, it will raise a ‘red flag’. Easy to read and explain financials will not only expedite the due diligence process but also build buyer confidence in the health and potential of your business. Ensure your financials are meticulous, up-to-date, and readily accessible.

5. Facilitating buyer finance

In troubled economic times like that which we are currently experiencing, an astute business owner will understand the prevailing financing landscape and position their business to make it easier for a buyer to fund the acquisition. I am seeing a lot more deals where an element of vendor finance is helping to bridge the gap between other sources of funds and the amount required to buy the business.

Vendor finance can often not only help the seller maintain their price but also potentially continue to get a worthwhile investment return on a portion of the purchase price. In my experience, vendor finance can make your business more attractive to potential buyers, can widen the pool of potential buyers and facilitate a quicker sale.

6. Work hard to remove personal goodwill

In my experience one of the biggest helps to a seller getting the price they want is to demonstrate a business that can operate independently of its current owner. One of the best things a seller can do is aim for a seamless handover by preparing the team for the
transition and ensuring that operational knowledge is well documented and easily transferable.

7. Think like a buyer

As a business broker I think like a buyer when I am trying to help my sellers. Buyers will often be looking for issues in your business to find reasons to lower their offer and or risk. Put yourself in their shoes and pre-empt the potential issues that could be raised by either making the issue redundant or having a good explanation for them. Even with deep analysis there must also be trust. If you give the buyer reason to mistrust anything you say or do it can often create enduring due diligence and difficulty to close the deal if at all.

8. Seek advice from professionals

Seek out people who utterly understand the business buy/sell landscape such as a Business Broker. A good Business Broker lives and breathes business sales/purchases and as such is exposed to all shapes and sizes of businesses and knows better than anyone how to create value in your business, so engage them early to help you prepare your business for sale and ensure you get the best price.

Summary

Selling your business is a monumental decision that, when executed with careful planning and strategic adjustments, can be incredibly rewarding. Remember, the value of your business in the eyes of a buyer extends beyond just its current profit margins; it encompasses the operational efficiencies, the smoothness of the transition, and the potential for future growth. By focusing on these key areas, you can enhance your business’s attractiveness and command a higher sale price.

Tags: selling exit strategy tips small business