How to Achieve a Successful Exit

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This article on how to achieve a successful exit was submitted by Verde Corporate Finance

Building any business takes time and dedication. So when it comes time to look at exit options, in order to achieve a successful exit it can take time to prepare and execute. There is a lot that could be done to increase the value and appeal of the business to prospective buyers.

Here are some key things you should look at to prepare for a successful exit if you are contemplating the future sale of your company.

The company valuation

Whether or not you are looking to sell your business, it is important to have a realistic idea of the company's value. This can affect business operations, planning and the company’s well-being.

While it can be easy to be inspired by other companies who may have sold at astronomical multiples, it is important not to overvalue the business. Ideally, it’s best to seek external  professional advice to find an accurate and fair valuation for the company.

Keep in mind that ultimately, a company is only worth what someone will pay for it. It can vary based on the condition of the business and the industry it operates in, reinforced by its ability to generate sales, cash flow and profits, along with the value of assets.

Identify key value drivers

Identifying the key value drivers to your business comes hand in hand with the valuation, the valuation should reveal where the drivers of value are in your business. Knowing this allows you to focus time and energy on improving value drivers that are deficient, and to improve and safeguard those that are performing well.

Reduce dependence

Building a company structure that depends less on the owner and more on the team is an important objective for those even contemplating future sale, and a successful exit. The company needs to be able to run effectively without the current owner. Building a strong management team will also provide protection in the event of unforeseen illness or  extenuating circumstances.

A strong management team in place makes the business more attractive to future buyers. It will help ensure a smooth transition after the sale.

Verde Corporate Finance

Establish company processes

Many small businesses can get away with ad hoc, informal processes and systems, but these will not help the company’s value when it comes time to sell. Improved documentation, operating controls and governance go far in making a company look stronger to potential buyers. Ideally, the business should have an accurate, timely accounting of historical information, forecasts and budgets to guide future performance and achieve a successful exit.

Understand the quality of earnings

Try to view your company the way a potential buyer will to help you understand how to maximize the value when it comes times to sell. Always keep in mind that offers are developed using specific formulas that take into account assets, earnings, industry, and any debt or losses. Regardless of the equation used, the earnings are an important component. The eventual money in your pocket is often a result of earnings times a multiple. The multiple is a subjective one, usually based on the potential buyer's assessment of the quality of your company's earnings. Improving that quality will help drive superior valuations, but it takes time.

Turn to the experts

Whether it's driven by ambition or necessity, careful planning and support from experts undoubtedly ensure the best results with fewer obstacles. Using a firm that are knowledgeable and experienced in exits is vital to achieve a successful exit.

At Verde Corporate Finance, we’ve carried out many valuations for businesses and currently have a number of companies we are representing throughout their exit to ensure they are successful in achieving what they have set out to achieve.

Business News Wales