Kirsten Smit, Advisory Partner, Citadel explores how to prepare a business for sale. Too often, business owners wait until they are ready to sell their business before they start planning their exit which often results in them not achieving maximum value. You only sell your business once and appropriate preparation and thought is essential.
While every business sale is unique, there are a few common tips applicable:
1. Ensure that you really are ready to sell
Selling a business is a major decision, both financially and emotionally, and you need to have thought through all the repercussions before taking the plunge. You need to put yourself in a post-sale headspace and ensure that you are fully prepared for life after business X.
2. Develop a strong “exit team”
Ensure that your key employees / management are on board with your exit strategy and are incentivised accordingly. Without their cooperation and buy-in, you are automatically adding risk to the equation.
Find the right combination of service providers (financial / legal / tax advisors / business brokers) who are excellent in their field and who have a proven track record in adding substantial value to the sales process. Build a relationship with them early, so that they can work with you on an optimal exit strategy as well as ensure that your timing is as efficient as possible.
3. Get your house in order
Time is money. Most professional fees are time-related and your costs are simply going to spiral if service providers need to wade through a haphazard maze of documentation. In addition, every item / area that is in disarray will potentially impact on your exit price. This is a non-negotiable – you need to run a tight ship when it comes to record keeping and ensuring that your files and processes are in order.
Be fanatical about getting your financial statements in order and actively seek feedback from your auditors as to how you can correct any issues or improve on definitive metrics. It goes without saying that you need to use reputable and well-respected auditors – a person with a mere book-keeping certificate isn’t going to cut it.
4. Have a fall-back plan
Even the best-made plans are subject to unknown variables, and you need to build in contingency measures, and ensure that you have built up financial assets and income streams outside of your business.
Liquidity is king and, to aid flexibility, always have cash on hand or have access to assets that are readily liquid.
A financial advisor is able to add significant value in ensuring that your overall financial roadmap and personal risk management is sound.
By planning ahead and preparing well in advance, exiting your business can be a fulfilling and profitable undertaking. Ensure that you have laid the right foundation and that you have good support.
Kirsten Smit is an Advisory Partner at Citadel