Explore the Options
“Ask any comedian, chef or tennis player, timing is everything” Meg Rosoff
An exit journey is not a single path. It’s more like the choices your satnav gives you when you plan a trip where you’ll be given the fastest route, the simplest route and the route that avoids motorways or toll roads.
As a business owner the best time to look at your options is as early as possible. You can explore, on paper, the potential outcomes and prepare for the one that best suits you and your business. It may change over time. You may start out thinking you will sell to the highest bidder and then decide that you are going to become an employee-owned company. If you are a family business, the intention may be to pass it on to the next generation. If the next generation are not interested, then you have to look at other options and prepare accordingly.
One thing is certain:
100% of business owners leave their business, one way or another.
The only thing up for debate is how ready you are when it happens and how much control you have.
Most business owners have a multitude of options available to them when it comes to transfer of ownership. This isn’t clearly understood by the majority of business owners and it is not explored by some brokers who are not motivated to educate their clients.
A good broker or M&A advisor makes sure you understand your choices and what alternatives are available to you.
As the combination of options is so varied, I’m going to cover the general principals here but there are resources and further reading later in this book and you can always just give me a call! A 30-minute conversation illuminates what’s possible and gives you more insight than you have now.
What are the options?
Here’s a few ideas – it’s not an exhaustive list and I have left out ‘closing the doors’ which is also an exit option:
- Transfer within the family
- Buy-out from other shareholders
- Become employee owned
- Management Buy Out
- Sell to a third party (this has multiple options within it)
- Merge with a competitor or adjacent industry
- Buy another company (which sounds counter intuitive)
- Get a public listing (IPO)
- Sell only part of your ownership
- Get investment from Private Equity or Venture CapitaEach of these options is does not exclude any of the others, in fact you may choose a combination of them to get to your final destination.
Understand the journey
With so little understanding of the exit process, it is no wonder that business owners get frustrated with the elements of the journey they are about to undertake.
Selling your business is a hard journey, both mentally, emotionally and physically. If you aren’t prepared it is going to take its toll on you and may end up without a transaction to show for all the effort and anxiety.
You’re going to end up with fees to pay even if the transaction fails. But this is not the only price to pay. The disruption to your business has future impacts too, often in lost revenue, lost staff and reduced efficiency for a period of time.
In more than one case I have joined a business where the broker is already involved, and the sale process has become stuck. In almost all cases the issue could have been addressed if the business owner had been given a clear idea of the steps in the process and what was needed in terms of preparation. It’s the equivalent of making sure your car is full of petrol for a long trip.
It’s worth knowing the general direction of your journey before delving into the actions you need to take. The headlines of an exit journey are:
- Preparing your business for the exit option you have chosen
- Finding the right advisors
- Writing a brochure explaining your business to a buyer
- Finding a buyer
- Undertaking buyer due diligence (there is also seller due diligence)
- Preparing the transaction documentation
- Negotiating the final details
- The transfer of ownership
- Post transaction requirements and commitments
To get into the right frame of mind you need to start looking at your business through a buyer’s lens. Attracting a buyer is very much like finding customers, you must give them what they are looking for, which means understanding what they are seeking from the acquisition of your business. The first issue is getting your business professionally valued.
“Before everything else, getting ready is the secret to success” Henry Ford
Are you ready to sell? Click here to contact Christine by email alternatively you can book a call with the Business Mentor of the Year 2020, author and speaker. Who helps business founders get their businesses exit ready so they can enjoy a happier, richer future. She saves them THOUSANDS and increases the value of their businesses by MILLIONS.