Exit planning can have a significant impact on the value and saleability of a business. All business owners who are within 5 years or less of a potential sale of their business should start thinking about an exit plan. In this article, we identify the key ingredients which any exit plan should include.
1. Exit Committee
Form a small group that will meet on a regular basis to implement and review the progress of the exit plan. This group could include key shareholders, key members of the management team, non-executive board members and advisers.
2. Timing of Sale
Decide on the optimum time to sell. This will be based on a combination of personal shareholder objectives (both financial and non-financial), market factors and the opportunities for improving the valuation of the business.
3. Business Planning
The business plan is an essential part of any exit plan. Identify the key growth opportunities for the business and develop a 3 year business plan. Ensure the plan is communicated clearly to the management team.
4. Management Structure and Resources
Ensure you have the management structure and resources in place to implement the plan and ensure the team is sufficiently incentivised to achieve the plan.
5. Financial Reports and KPIs
To monitor performance against plan, financial reporting measures and KPIs should be incorporated into a monthly reporting pack. Such information is always well received by a purchaser.
Set a target valuation for the business, based on the business plan and the proposed timing of sale.
Undertake global research to identify the most likely purchasers and keep track of developments in the market to help you develop a better understanding of the strategies of the buyers and what they are looking for.
8. Market Positioning
Consider refreshing your branding to reflect the growth strategy and the likely buyer population. This may also include a social media strategy or a PR strategy to help raise your profile.
9. Due Diligence
Prepare an in-house data site with all the information that will be required for due diligence.
10. Tax Planning
Ensure you have considered all tax planning opportunities well in advance.
There are many other small things that can be done to improve the saleability of a business and to ensure the sale process is smooth and efficient. The more time you have to plan for an exit, the better the result will be.
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