Blog
Exit planning - can it ever be too early?
September 7th 2011
We often meet shareholders wishing to sell their businesses who have not carried out much, if any, pre-sale planning. Unfortunately shareholders often realise too late that they could have increased the value of their business and improved its saleability if appropriate action had been taken beforehand. Why is sale planning so important? Can it ever be too early to start contemplating how you will exit your business?
For shareholders to maximise their sale proceeds a business has to be performing strongly and have great potential at the time it is sold. The decision to sell can often be motivated by the age or poor health of the shareholders, by which time the business may already be in decline. This is rarely the best time to sell.
There is no magic formula which specifies when the time is right to sell as each business is different. However a key driver is almost always its trading performance.
A higher value is normally placed on a business when sales and profits are growing and when the growth is expected to continue.
Profitable historic trading and growing sales alone though do not make a business saleable if there are major issues, threats or risks attached to it.
Early planning to identify, address or mitigate any such issues (e.g. weak second tier management team, heavy reliance on key customers or the exiting shareholder, inadequate management systems and controls) always stands shareholders in good stead. If issues are tackled in advance, shareholders will be well placed to contemplate a sale of their business at the point when its trading performance is strong and a potential purchaser can have confidence this will continue under their ownership.
Shareholders busy working in the business can often be so involved with its day to day running that they don’t see the bigger picture. Consequently, unless advice is sought, they may be unaware of the significance of issues on the value of the business or the increase to the capital value that could arise from pursuing opportunities to increase sales and profitability.
Working alongside experienced business coaches with specialist skills, we can provide an early impartial view on the saleability of a business and the key factors affecting value and we can work with you to shape and develop your business to reach its full potential.
Irrespective of when you ideally wish to sell your business you should always keep an eye on your eventual exit and make sure that the decisions you take in the years leading up to that point are consistent with your ultimate goal.
