Exit strategy: why you need to start planning *now*

If you’ve grown your business, you’ll know the blood, sweat and tears that have no doubt gone into making it a success. Therefore, when you’re ready to sell up and exit the business, you’ll no doubt want to collect on all that time and effort you’ve invested. And indeed, selling a business can be one of the most financially rewarding and important events in your working life. Our director Carl Reader shares 5 top tips on exit planning, and how to sell your business at its maximum value. (This article was first published in Making Money magazine) Carl Reader, author, business expert and director of d&t

1 – Plan ahead, and really know your buyer The key to maximising your business’s value is in understanding exactly what buyers are looking for. You can then plan for this in advance. Selling your business will probably be the most important deal of your life, and should never be a snap decision. Preparing at least two, but preferably three or four years prior to the sale allows you to plan and execute the sale carefully, making it more attractive to potential buyers. If you can develop a list of possible buyers and their requirements, you can model your company to be attractive to these buyers. If you can, also develop business relationships with these prospects. This will allow you to negotiate over several years, maximizing the overall price and reducing the amount of non-cash terms in the sale.

2 – Ask the experts Every business is different, and every business requires an independent analysis, particularly when it comes to the valuation process. A professional intermediary, such as your accountant, will help ensure that the business has been fairly valued. In advance of the sale, they can also help with your figures – see #3. The mechanics of selling your business are best accomplished by a knowledgeable professional who can guide you through the complexities of the exit process.

3 – Present your figures clearly Most buyers expect to have access to audited financial statements. Make sure these are prepared at least two years before you’re looking to start the selling process. Your accountant is a valuable resource and guide here. The audit process provides a more accurate picture of the company’s financial performance and enhances credibility.  It is also important for your business to demonstrate that its reporting systems are simple, accurate, and timely.

4 – Increase profitability Buyers tend to base their purchase offers on the most recent three or four years of earnings. Together with a trend of increasing revenues and profits is, of course, the key to obtaining the best price.

This isn’t the easiest task, but given the time, most companies can improve their earning situation in some way. Take a step back and scrutinise – eliminate any unnecessary administrative and operational processes. Don’t be afraid of change in your business – it can enhance value over time. A business in a crowded niche, for example, might be well-placed to consider purchasing other businesses or product lines to improve its own strategic value to potential buyers.

5 – Put yourself in their shoes – what are the deal killers? Unmodifiable contracts and long-term leases are often rejected by buyers. The most common deal killer, however, is an insistence on a high price that cannot be justified by the expected return on investment.Get a fair valuation and be optimistic but realistic. Make sure your company is as clean as possible, with no environmental, safety or compliance problems. Good housekeeping, repair and maintenance are also essential for making a good impression.

For more information about exit strategy and selling your business, talk to us at d&t, we are proud to be an accountancy firms with a difference. We support hundreds of businesses across the UK with business advisory and accountancy services. Contact us to find out how we can help you gain complete control with fixed monthly fees and ongoing, friendly support and advice.