Whilst all businesses are unique, and every exit is different, there are often similarities. Below we outline 12 key actions for company owners on their journey through a ‘typical exit process’.
A step-by-step guide
- Define your sale structure - Here you’ll want to work with your professional advisers to outline your ideal sale structure, from a financial and legal perspective.
- Maximise the right metrics - While businesses can be valued in several ways, there will often be a prevailing valuation method within your industry. Identify what that is, get a current valuation for your business, and focus your efforts on maximising this metric.
- Protect what you’ve built - You’ve worked hard to build up your business, so it makes sense to protect it. You may be able to ensure the continuity of your business by encouraging key people to stay in place and insuring against them becoming too ill at work, or dying. You’ll already have cover for your buildings, stock, cars and other assets, but you may not have covered your single biggest asset; your key employees. These are the individuals responsible for driving profit and cashflow within your business.
This type of continuity planning can be essential, and is often a prerequisite for certain types of buyer!
- Plan beyond your exit - Don’t wait until after the sale to start planning what to do with the proceeds. This should be done well in advance.
The wealth you’ve built should be protected, optimised for tax-efficiency and invested wisely. After all, why build all that wealth in the first place if you’re not going to look after it? Speak to your financial planner to get the wheels in motion on this. If you don’t have one yet then find a specialist that will sit with you for a no obligation chat.
- Create a killer pitch deck - This document should present the business in a positive light and will be used to invite offers from prospective buyers. The deck will often outline the business’ key customers, suppliers, your business infrastructure, and historical and forecast financial performance.
- Shortlist potential buyers - At this stage you’ll outline which type of buyer you’re getting your business ready for and even start to accumulate contact details of the individuals at each purchaser to receive your pitch. Think about the Investment Managers from various Venture Capital firms that you might be able to reach out to for example.
- Email, snail mail or hand deliver – One way or another, you’ll need to get your pitch book in front of your potential purchasers.
- Pitch your heart out - Hold off site meetings with potential purchasers, and present your business to them . Ideally, this would be the stage at which you begin to negotiate and obtain initial offers on the business.
- Compare the offers - If you’re lucky you’ll have options. Evaluate their merits and select the offer that works best for you and your business.
- Get the buyer comfortable - Deal with the purchasers’ due diligence requirements including their commercial, tax and legal issues. Work with your potential buyer to answer any of the questions or concerns they might have. Spend time with them to get them completely comfortable with the business they’re buying.
- Complete legal documentation - Based on advice and guidance from your professional advisers.
- Finalise the exit - Detail the conditions for completion and outline the practical aspects of handover. This includes informing staff and customers of the changes being made.
Becoming investment ready
Ultimately, it’s about putting yourself in your investor’s shoes. How can you get your investor comfortable enough with the risks that your business faces, that they’ll invest anyway? And how can you communicate your vision and the potential upside for them in a way that they can really buy in to?
There’s a lot that goes into becoming investment ready, but we hope that the practical tips in this article goes some of the way towards getting you comfortable with what’s required. You can use this guide to help you prepare your business for investment, or to inform your discussions with professionals in the space.
The value of an investment with St. James's Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.
The levels and bases of taxation and reliefs from taxation can change at any time. The value of any tax relief depends on individual circumstances.
Exit Strategies may include the referral to a service that is separate and distinct to those offered by St. James's Place.
JHF Wealth is a trading name of J.H.Flemmings Limited. J.H.Flemmings Limited is an Appointed Representative of and represents only St. James's Place Wealth Management Plc (which is authorised and regulated by the Financial Conduct Authority) for the purpose of advising solely on the Group's wealth management products and services, more details Of which are set out on the Group's website www.sjp.co.uk/products. The titles 'Partner' and 'Partner Practice' are marketing terms used to describe St. James's Place representatives.