The failure to develop and continuously revise a business exit strategy can be a huge mistake for a business owner. Exit planning should begin when your business does. This plan will support you to keep your business moving in the right direction. It helps you align today’s actions with your long-term goals. It can also help you decide whether there is a “trigger event” indicating it’s time to seek an exit.
Here are seven smart steps to prepare your business for your exit:
- Focus on recurring revenue. Revenue forms a critical piece of your exit plan. It’s not just how much you have—it’s also how it reaches you. Recurring services and subscriptions offer predictable revenues that are attractive to buyers.
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The right growth pattern. Good growth is key, but the right growth pattern is even more important. Acquirers want steady, predictable growth, not large gains followed by smaller ones. A few dips here and there are fine, if you can explain them. What matters most is the overall trend.
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Create clear standard operating procedures (SOPs). Without detailed standard operating procedures, your business is a ready source of chaos. Your goal should be to ensure that, even if something happens to you, your business will continue running like a well-oiled machine. At a minimum, SOP should include a marketing plan, sales plan and procedures, executive strategy, and detailed operating procedures.
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Offer something proprietary. Something a buyer can’t get elsewhere is inherently valuable. That doesn’t mean your intellectual property has to be patented. But it does have to be uniquely your own. Highlight anything that is exclusive to your business. It may be your biggest selling point.
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Practice good bookkeeping. No one is successfully acquired without a good set of books. Buyers want to see proof of your claims. They want to avoid risk. Good bookkeeping documents your promises and eases the worried minds of buyers.
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Remove yourself. You’ve poured your life into your business. Now it’s time to make yourself irrelevant. When a business is dependent on the owner, this presents significant risk to the buyer. Make your business capable of running well without you, so that a new owner can feel confident taking it on.
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Train and put in place a solid management team. You can’t do everything for your business. Don’t try. Rather than forcing your business to rely solely on your own intelligent decision-making, put in place a reliable team of management experts. Things will look even better if you have great employees with solid contracts working under those managers. New owners want a team of people they can trust. The right management team can shepherd your organization through the sale and help a new owner learn the ropes. Work now to cultivate this team.
If you are planning to exit your business at some point in the future, don’t just assume that someone will want to buy your business. Increase your chances of success by following the above steps and reviewing your exit plan on a regular basis, and seek out the help of an experienced investment banking firm, such as Madison Street Capital.
About Madison Street Capital
Madison Street Capital is an international investment banking firm committed to integrity, excellence, leadership and service in delivering corporate financial advisory services to publicly and privately held businesses. Over the years we have helped clients in hundreds of industry verticals reach their goal in a timely manner. Our experience and understanding in areas of corporate finance and corporate governance is the reason we are a leading provider of financial advisory services, M&A, and valuations. With offices in North America, Asia and Africa, we have adopted a global view that gives equal emphasis to local business relationships and networks.