‘Building your Business for Exit’ Event Takeaways
In case you weren’t available on the day, here are our top takeaways from the event.
Failing to prepare is preparing to fail
In preparing to sell your business, create a 3-year plan, set KPIs and monitor them.
Run your business as if you are going to sell it and minimise dependency on any individual clients, as a general rule of thumb, you do not want a single client to contribute to more than 20% of your turnover. Reducing dependency on any one client and continuing to diversify your portfolio will mean potential buyers will view your business as a lower risk proposition and in turn will increase any potential valuation.
Utilise external help early on in the process. Having a business coach, M&A advisers, HR, finance, etc. on board early will mean they can add as much value as possible and help guide your business in order to maximise value down the line. Running a tight ship on all in-house processes, particularly finance and legal, will reduce the chances of issues being found by a potential buyer later down the line.
Build a senior leadership team
Part of building your business for exit is effectively making yourself redundant so the business is able to run as effectively without you. How do you achieve this? By building a strong and robust senior leadership team who are correctly incentivised and importantly, locked into the business. As is the case for media and creative businesses, their main assets walk out of the door every night and there is no value in the business without their people, so ensuring they’re engaged and incentivised in the business is key.
Make sure your senior stakeholders are singing off the same hymn sheet
In order for any business to grow, it is essential the senior stakeholders are all on the same page and this carries greater importance when it comes to selling a business. If you cannot come to a consensus internally, you will never be able to agree on a deal externally. This process is not always straightforward as entrepreneurs will often have different views on what is best for a business and what is best for them personally. If there are disagreements and even fall-outs, this can impact the rest of the business, so rather than burying your head in the stand, use a mediator.
Simply put, without having a shared vision in place, you will not maximise the value of your business.
Should you bother with advisors?
Many reading this will be entrepreneurs, who have built a business without the need for advisors. Why would you spend a significant sum on advisors to take yours through an exit? Can’t you just do it yourself? It worked in building a business, why would you now need an advisor?
It is a fair question. Advisors are expensive, very expensive in fact. So, what is it they do to justify their rates?
They will help conduct a health check on the business, help bring the management team in the loop and incentivise them, filter and qualify offers from interested parties, arrange and chair meetings and negotiations, build competitive tension in order to drive the best offer. Managing the exiting of a business can be an extremely time-consuming process and a process which requires a high level of expertise and the use of advisors will, in turn, free up management to keep running the business.
In short, ensure a successful sale and maximise the value of your business.
Exiting a business is like no other deal and is likely the biggest and most complex deal you will ever do and this should not be underestimated going into the process.
Whilst advisors do represent a significant upfront investment, they are not expensive in relative terms and justify their fees many times over.
Note: If you’ve used your local accountant for years, the (very high) chances are they will not possess the required M&A experience to effectively manage the exit process and will not allow you to get the maximum value for your business.
Something is only worth what someone is willing to pay!
You cannot control what your business is worth at the time you decide to exit! So, whilst it can be difficult, try not to focus completely on selling your business and instead build a business you love and would be happy to stay in.
Remember, everything comes down to the market and the problem with the market, as said by Warren Buffet, “Mr Market…has incurable emotional problems…At times he feels euphoric and can see only the favourable factors affecting the business…At other times he is depressed and can see nothing but trouble ahead for both the business and the world.”
In selling a business, timing is everything and prices do fluctuate. After all, Liverpool paid Newcastle £35m for Andy Carroll!
Finding the perfect time to sell your business can be difficult, so make sure you don’t stand still and continue to keep learning and developing yourself.
And remember, do not spend the money until the sale is completed and it is in your bank!
Interested in attending future events?
We hold FD dinners biannually, so if you are a Finance Director (or CFO) within the technology sector and you’d like to attend, message me today on firstname.lastname@example.org / 0203 3805 5232.