Stay on Track During Your Exit Planning Strategy
Before you, as an entrepreneur, decide to sell your company, you should outline the process. Selling a company begins with thorough preparation and ends with the fulfillment of the sales contract. The sales process in the middle is divided into various phases.
The sales process starts with a complete company analysis to identify improvement areas; then, potential buyers are addressed. Once the end of the initial discussion, the selected interested party receives access to the documents and relevant data for due diligence to be carried out. Ideally, after further negotiation, the preferred buyer signs the sales contract.
The real key to success is thorough preparation combined with a structured, tactically optimized approach. This results in selling the company at the best price.
Exit planning can be a years-long process during which you may stray from your exit strategy. Staying on track with the business exit plan will help you build and structure your business correctly and complete the exit successfully.
Keys to staying on track are:
- Identify your goals.
- Set milestones.
- Have an experienced team.
Identify Your Goals
If you want to sell your business successfully, you have to set goals. Just dreaming and hoping for a profitable sale is not enough. To set and achieve the desired outcome, goals must be concrete, realistic, and feasible. Failure often results not only from missing goals but also from setting unrealistic or unreasonable goals.
It takes time to prepare your company for the transition to new ownership. At the same time, you must ask yourself the right questions to prepare for the future under the best conditions.
What’s your motivation? First and foremost, it is important to establish the reasons why you’re selling your business. Reasons range from retirement, needing funds to finance a new project, the business being in difficulty, and wanting to devote yourself to new activities. Regardless of the reason, be clear about your motivation because your buyer will want to know, too. Honesty, always the best policy, allows you to be sure of your choice and avoid backtracking in the middle of the process.
How will you sell the business? Clarity regarding your motivation allows you to prepare your exit strategy properly. Think about what you are going to sell: company shares, goodwill, etc. If you have chosen to retire, you will avoid signing a deal with an earn-out clause (where part of the sale price is determined by company performance for the next one, two, or three years). Whether or not you want to remain a stakeholder in the company, you may continue to work there as an employee or consultant, remain on the board of directors, or completely separate yourself from the company. Be clear about this; it affects the sale price, the date when you can use the money from the sale, and the free time you will or will not have afterward.
When will you sell the business? On average, it takes six to nine months to find a buyer and conclude the sale after the business has been optimized and prepared to sell. Negotiation of the sales contract may add more time to the transition period. Knowing the schedule of events enables you to know when you will be free from your obligations to the company and receive an inflow of income. This knowledge makes it possible to set up a transition program for the weeks or months following the transfer to put your finances in order, plan a trip, or do something else.
Whether you’re retiring or moving on to other challenges, selling your business is one of the most important decisions you will make as an entrepreneur. You’ll want to take the appropriate steps to increase the value of your business and maximize its selling price.
Your business plan represents a schedule of entrepreneurial activity for the next few years, so set milestones to achieve your end goal. Setting milestones along your exit plan makes your goals more manageable. They show the way to completion and mark your progress. Selling the business will only be completed successfully if all milestones are achieved.
Company valuation, value creation, due diligence, binding offer, negotiation, closing: there are many milestones to meet when selling a company. A successful company sale begins long before initial discussions with potential buyers and investors. Setting the right milestones has a decisive influence on future proceeds.
Have an Experienced Team
Owners of small and medium-sized businesses may shy away from the expenses incurred by involving an M&A advisor. On the other hand, executive management of large, established companies recognize the complexity of the sales process and engage expert assistance to obtain a successful exit.
Expert, professional help isn’t cheap, but an experienced partner who accompanies you through the complex processes of selling the business and succession planning dramatically enhances the probability of your success. Despite individual requirements for each unique business, we pursue uniform goals for every company sale:
- Trustworthy, reliable support and representation of interests: You need a partner representing your interests at the highest level, from discreet preparation to negotiation and ultimate implementation.
- Maximized sales price: A good team helps increase the company’s value by optimizing financing and tax structures and the business’s internal processes. As part of this management consultation, the company’s teams and your team of advisors will address the factors relevant to increasing the sale price.
- Preparation and installation of corporate successors: Recruitment of qualified executives for corporate succession ensures that the company’s satisfactory performance continues for prospective buyers.
- A successful transaction process and a satisfactory conclusion: A good team will design a promising transaction structure and accompany you through the sale conclusion.
If you want to glide through the business exit process, hire expert advisors to guide you and help you make the best decisions.
Goals, Milestones & Expert Advice
A business purchase agreement prescribes the seller’s obligations in transferring business assets to the buyer and the buyer’s payment obligations for the acquired business. Typically, the sale of a small business for cash is made by issuing appropriate receipts for the receipt of money from the company’s seller to the buyer. However, a medium or large company transaction entails a much more complicated process that proceeds through the same general phases but takes longer due to the added complexity. Goals, milestones, and expert advice help you navigate that complicated journey.