Exit successfully
Eventually, everyone exits their business.
The timeframe you plan that over affects how much impact you can have on the value of your business.
Focus on running a winning sales process
Develop your growth story
Build your team
Drive efficiencies
Run your business to build value while recognizing
the process you will take when you get to your exit
Exit immediately
Many business owners stay focused solely on running their business until they decide to sell. Then they hire an investment bank and let the i-banker drive the process. That only solves part of the problem. Investment bankers can package your company and take it to the market, but your management team has a huge role in how the market responds.
You need to look at this process from the eyes of the buyer. Most PE firms will only buy a few platform companies this quarter (or year). They cannot afford to make a mistake on investment. The principals have to make these key decisions:
Do we make an offer on this company?
How much do we offer to pay?
Do we close on this deal?
You want them to have the perspective that your company is THE company they need to buy in this window.
There are many steps that build to that result as part of what we call the Fast Track Exit Roadmap
How your team performs in each of these steps will have a huge impact on the ultimate value the market places on your business.
One of the most critical is the Management Meetings. Generally, as you near the end of the process, you will have 5-20 Management Meetings with the buyers who place the highest value on your business. A common flow is that you will have dinner the night before, offer a tour of your business at the start of the next day, have a morning meeting to share your presentation, and that is it.
It is critical that your management team knows the business, presents well, and answers questions with confidence. They need to convey a mastery of where the business is, where it is headed, and how they are going to achieve it. If the team does well, many buyers will make an offer. If they fall short, few or none will. If many buyers bid, prices can rise another 20% in a secondary auction. If few or no bid, prices may fall 10% or the deal may break.
Think about it: the value of years of your life can swing by 30% or more depending on how well your team does in a one to four week period.
This is why it is so critical to have a business coach partnering with your management team throughout the sales process working together with whatever investment bank you may hire. We can provide you with a complementary initial consultation to learn how you can win in the exit sales process.
Exit in 1-3 years
If you have a year or more before you are going to sell your business, there is so much more that you can do to increase the value of your business.
The key step is to evaluate your business with the eyes of a buyer:
Industry: How attractive is your industry? Which segments are growing? Which are more profitable? How well positioned is your company?
Management: How strong is your management team? Can I trust them to run the business on behalf of my investors?
Sales & Marketing: How effective is your sales and marketing program? Can it reliably deliver sales, profits and growth?
Operations: How reliable are your processes? Do they provide real time feedback on what is working and where you need to improve performance?
Suppliers: How robust is your supply chain? Do my supply relations create a competitive advantage or do they pose a business risk?
Finance: Do you finances give you insight as to how to run your business? Are the financial processes robust?
Most companies have weaknesses in at least 2-3 of these areas, and many have room to improve across all of them. If you hire an investment banker without addressing them, then your potential buyers will raise them. This will reduce the price they are willing to pay for your business.
Instead, with a 1-3 year window before selling your business, you can create significant value by addressing these head on:
Industry: You can’t really change your industry, but you can focus on the most profitable, growing segments and get traction in advance of the sale
Management: You can promote internal leaders into roles needing filling & hire outside talent to create new capabilities
Sales & Marketing: You can build out a more structured sales & marketing program and demonstrate via metrics (KPIs) the value it is creating
Operations: You can run lean processes to improve throughput, enhance quality, and reduce costs
Suppliers: You can implement strategic supply chain to add flexibility, reduce costs, and improve response times
Finance: You can implement a leading ERP system and/or improve reporting. You can hire a finance leader the future buyer can trust
There are so many other opportunities to drive value in this window running up to the sale of your business, but this short list should highlight the multiple levers a business owner should pull to get the most value from the business when it sells.
The beauty of making these investments is that they have an immense return on investment (ROI). Businesses generally sell for a Multiple of Trailing 12 Month EBITDA. These investments both increase the Multiple AND improve EBITDA. In one case, a manufacturer ran a lean transformation of the factory floor, moving from batch flow to single piece flow, and increasing productivity by over 50%. The resulting increase in the sale price of the company was over 10X the investment made in the lean program – just from the improved EBITDA.
Even more importantly, when your company is actively driving improvement across multiple levers, when your management team is focused on growth and value creation, and when trends for both revenue and margin are positive, buyers are more excited about buying your business. This expands the Multiple your business will sell for.
If you are considering selling your business in the next 1-3 years, you have a golden window of opportunity. We can provide you with a complimentary initial consultation to learn how you can create a step change improvement in the sale price of your business.
Exit in 5+ years
If you expect to run your business for the next 5+ years, the best approach you can take is invest now in a well-run growth program. We design growth programs with the end in mind – enabling the owner to achieve a successful sale when it comes time to exit.
Our growth program starts with building a growth road map.
Our full growth program take a comprehensive approach to enabling growth – building the road map, strengthening the leadership team, and executing the program.