Tim Herbert, an experienced Business Broker from Carwardin, shares his insights on what business owners need to know when they've decided that it's time to exit.
In my experience, business owners often underestimate the time, resources, discipline and structure that they will need to complete a successful sale. It can be an exceptionally distracting and demanding process.
Here are 10 things that you need to know:
1. Your true timeline. How much time you have – the more the better. The best prepared have been thinking about exit since day one.
2. Business ‘now’ value. This is your starting point. Get a meaningful, multi-dimensional appraisal not just a crude ‘here are the rough multiples’ conversation.
3. ‘Future’ business value. A business that has potential for growth and is on the path to getting there (proven milestones etc) will get a much better price (or at least it should do if you have a good, experienced broker!) than a plain, old steady business.
4. Your business plan. The big-picture vision needs to be supported by a detailed business plan on how to get there. You don’t need to have the perfect business to sell for a good price, but you do need a realistic plan on how you will get there and the resources to do it.
5. Understand the risks in your business, how you manage them and the systems and procedures that you have in place. Demonstrate the capability of your people and why the perceived risks associated with you as an owner are minimised.
6. Yourself – what you are prepared to commit to and what your real time lines are; how is your exit from the business to be managed?
7. Sale does not solve existing problems! It actually put them under the microscope and magnifies them.
8. Get great advice and get it early. If you are worried about costs to the point of not talking to your advisors (e.g. broker, legal, accounting and tax) then you probably don’t understand the true risks that you are taking.
9. Quality information and communication is the life blood of a successful deal. Ongoing communication of financial performance during the process is required in addition to a quality information memorandum.
10. Run a proper process. Half measures increase the chances of problems with the transaction; confidentiality issues and also causing unwanted anxiety for both you and employees.
Don’t be one of those under-prepared owners that leaves money on the table. Get a great team and plan to get that great price and the terms you are after.
If you are thinking of selling your business in the short to medium term, why not get in touch to discuss your plans. We can both help you prepare your business for sale, and in Tim's case, help you achieve your exit goals.