Selling your business can be stressful, intense and an emotional rollercoaster ride. Founders and experts share insights on how to get exit-ready.
Get your house in order
The best preparation for a sale is a well-run business. You’ll be in a better position to negotiate a higher multiple if you have a good track-record with the numbers, a strong, realistic forecast, a solid pipeline of sales and recurring income streams. Make sure clients and suppliers are tied into long-term contracts and go through everything from IP registrations to data protection compliance with a fine-tooth comb. Make sure there’s absolutely nothing that could put potential buyers off. “The best multiples are from a clean business with its house in order,” comments Edward Persse, partner at Osborne Clark.
Hand over the reins
Put a succession plan in place well in advance – at least two to three years before you’d like to sell. You need to prove that the business isn’t dependent on you. Seraphine founder Cécile Reinaud brought in a COO and “road-tested” him for 18 months before handing over the CEO reins. “Be very clear about your plans to exit but don’t give too much control too soon: you could end up with a bull in a china shop,” she says. “Once I gained confidence in the COO and was convinced he was the right fit, I stepped back and became ‘president’ and he took over the day-to-day running of the business.”
Bring in a reliable FD
It’s crucial that you bring in a financial director or CFO early in the process to present the figures in the right way (using accounting treatments to favour a high EBITDA, for example). They can build and maintain your data room and respond quickly to requests for the right financial information. During the sales process, they can help you avoid under-trading and make sure your operational accounts balance with forecast numbers.
… And an experienced non-executive director
A non-executive director with a strong reputation can also add credibility to your business and reassure potential buyers. A non-exec can advise you on the right kind of exit, help you find an investor or buyer, and keep you focussed on the exit strategy. Think of your NED as a coach or mentor to guide you through the whole process.
Build your profile
Leading up to the sale, build your profile by entering industry or national awards, try to become a thought leader in the trade press, and speak at industry conferences. “Buyers and their advisers will Google you when they start to evaluate your business and it will be good for them to see lots of positive news,” says Jane Gomez, who leads The Supper Club’s Maximising Capital Value workshops.
Get the best advisers you can afford
Get corporate finance advisers on board early to help you understand what’s valuable to a buyer and what’s not. They know who’s buying, the right time to sell, and how to prepare your business to achieve the highest valuation. They’ll also flag anything on the horizon that could impact the sale. Whichever advisers you choose, make sure you scrutinise their track record, deal flow (particularly within your sector) and references. Shop around and don’t underestimate the importance of personal chemistry. “You’ll be working with your corporate finance advisers for at least a year. It’s very intense. You have to have a good rapport,” adds Reinaud. They’ll normally agree a valuation upfront and take between 1% and 3% (anything above that is on a ratchet system), plus a retainer of £40k-£60k. Ultimately, you get what you pay for. Members say the best advice more than pays for itself in the capital value uplift or avoided pitfalls. “You’ll be judged by the company that you keep; get the best advisers you can afford to deal with the buyer’s heavyweights,” comments Guy Mucklow, who sold his data intelligence firm PCA Predict in a £74m deal.
Put together a communication plan
Keep everything under wraps under the deal is done, otherwise employees will start worrying about the potential impact on their jobs. To avoid arousing suspicion, conduct all exit-related meetings away from the office. If the sale is likely to go through, prepare an agreed announcement for all your employees (being mindful of staff on maternity leave and on holiday) and a press release for clients. If you operate in multiple time zones, be careful with the timings: you don’t want any of your teams to wake up to the news before you’ve had a chance to talk to them. Draw up a “what to expect” guide and clear your diary to answer any questions. You want your business – and your legacy – to thrive long after your departure!
At that point you have to ensure you as the founder are prepared for what comes next. Hear more advice on that from Supper Club members here.
