This is Part 2 in a series on exit planning. Read Part 1 here.
Selling your company successfully requires far more than hiring an investment banker. This phase is about making your business so strong, attractive and competitive that it becomes the obvious choice for a buyer. And it takes time — often two to four years — to do it right.
Here’s why:
- It may take a year just to identify opportunities for improvement and implement changes.
- It may take another one to two years for those changes to positively impact your P&L.
- You’ll then need a year of consistent results to prove the improvements are sustainable.
If you’ve had the same leadership team for more than five years, consider bringing in an outside executive with deep operating experience to objectively assess your business and uncover hidden value.
Here are the core focus areas:
Business Strategy and Annual Operating Plan
- Keep a written business plan and show you consistently meet your goals.
- Demonstrate a balanced, resilient product mix and a diversified, loyal customer base.
- Prove that you have a clear marketing strategy that drives demand and reflects your understanding of the competitive landscape.
- Build credibility by showing a track record of setting objectives — and achieving them.
People and Culture
- Strengthen your management team — buyers purchase leadership as much as EBITDA.
- Demonstrate that your senior team, without you, has vision, leadership skills, emotional intelligence, strong communication and proven problem-solving abilities.
- Show that your culture supports growth, accountability and collaboration that drives the business forward and delivers results.
Operational Discipline
- Track and understand your key performance indicators (KPIs). This shows that you really know what drives your business.
- Make your KPI’s visible. If people know you are tracking it, it will improve.
- Maintain a robust quality program to control costs and improve customer satisfaction.
- Provide accurate, timely, and clear operational and financial reports — mastery of data builds buyer confidence.
- There is strength in the command of the data.
Financial Strength
- Gross margin is number one! Prioritize it. A strong gross margin shows that you can make money while producing and delivering your core products or services. Most operating expenses are manageable. A strong gross margin is the key.
- Deliver EBITDA growth above industry standards to show that you are a very attractive acquisition.
- Maintain strong financial controls, clean books and disciplined reporting. This shows that your company is well run with nothing to “fix” and therefore, very desirable.
- Keep a healthy balance sheet.
- Document your “adjusted EBITDA” to clearly show normalized performance.
Governance and Decision Making
- If you don’t have an advisory board, consider adding one. They can add value during the process and improve your management team’s performance. An advisory board also shows the buyer that the team is used to taking outside advice and will be open to change.
- An advisory board can also give you a “higher authority” to improve your negotiating position during the sale process.
- Demonstrate that your management team makes good decisions, even if you are not involved.
- When making tough business decisions, focus on the facts and numbers. Numbers have no emotions, and ask “Why?” or “So What?” at least five times to get to the real issues underneath the surface.
The Goal: Build a ‘Must-Have’ Company
You want to build a company that is so competitive and well-positioned that if someone wants to enter your market, the only real option is to buy you.
Bottom line:
With the right preparation, the right team and a disciplined approach, you can maximize value, attract the best buyers and create a smooth transition to your next chapter and legacy.