Exiting your business

Prepare from day 1

When in the throes of setting up a new business, the last thing most people are thinking about is leaving it – but that could be a mistake. The early days are when the business is structured and processes put in place – areas that can prove a massive headache at the time of a sale if you don’t approach them in a professional way.

See the wood, not the trees

Startups are renowned for being ‘all hands on deck’ with founders and early employees performing a multitude of tasks, some of which may be outside their area of expertise (social media, anyone?) Yet it is vital that the driving force behind the business – the entrepreneurs – are focused on building long-term wealth into it with strategic planning and not simply reacting to daily challenges as they crop up.

Share and share alike

To drive value into your business, you cannot underestimate the importance of your staff. To retain their skills in the long-term as you grow and secure their emotional investment alongside your own, introduce a share scheme where employees can buy into the business when they join – and eventually benefit from a sale.

A clear roadmap

No doubt you have a business plan to identify how and where to execute your growth strategy… it’s practically impossible to secure investment without one. But as soon as you are motoring, put time and resources into also creating an exit plan – identifying the stepping stones along the way which will create the perfect business for a sale.

Choose your advisors carefully

It is crucial to find reputable legal and corporate finance advisors to work with you on a sale – whether to a rival business, one that complements it or a private equity company. The chances are the situation will become tense at some point and having credible figures alongside you who have seen it all before can be a vital source of reassurance.

An objective view

As the founder of a business involved from day one, you are emotionally attached and pretty much incapable of calculating an unbiased estimate of its true value. Likewise a buyer will be keen to acquire the business at the lowest possible price. Take heed of trusted third parties – almost always involved in the sale process anyway – and their assessment of its worth.

Get further support

An obvious source of guidance for an owner who will one day sell up are the investors backing the business – after all, they one day hope to see a return. Often they have built and sold businesses themselves or are vastly experienced in deal flow. Picking up the phone to trusted business contacts for advice is always a great idea. There are also specialist companies who can help plan for an exit.

Consider your employees’ POV

When identifying a buyer, consider what the resulting transaction may mean for your workforce: a trade sale can be a worrying time for those who rely on the regular paycheque to pay their mortgage and put food on the table.

Take the initiative

You may realise the most financial value from a trade sale to a buyer who approached you. But does it tick all the boxes? By proactively screening for potential acquirers and discussing the opportunity with them, you can increase the likelihood of exiting to a responsible company with the best interests of your baby at heart. Just have them sign an NDA first…

To the not-so-bitter end

Just because a sale is agreed, it doesn’t mean that the job is done. In fact, you’re only halfway there. Hurdles almost always crop up which may affect the outlook – from big ones such as COVID to small-scale changes in the market or regulation.