There is buzz that the economy is going to keep improving this year, and a good amount of merger and acquisition activity is anticipated. In light of the economic optimism, this may be a good year to consider making some changes to your business. Perhaps you have been gearing up to take your private company public or maybe you are even considering selling the business altogether. A lot of entrepreneurs begin to plan their exit strategy when they are just getting the business off of the ground, but plenty of others may not think that far out for fear of getting ahead of themselves. Regardless of where you and your team are in the thought process, it is always wise to create an exit plan at least several months in advance, although longer is ideal, to ensure it is executed to your satisfaction. Here are key things to consider when creating a business exit plan for this year:
Outline Your Goals
As with the creation of most business plans, one of the first steps in making an exit plan involves the establishment of specific goals. More than likely, the leaders of a company have an idea as to what type of offer and terms they would be willing to accept, as well as the kinds that they would be unwilling to even consider. Some companies may only care about the actual price, whereas others may want to retain some sort of interest in future earnings or negotiate for the inclusion of other specific caveats. Because these desires and expectations can vary so much between people, firms, and industries, it is crucial for the team to come up with mutually agreeable goals for the exit plan. It is especially important to do this early on, so that offers do not start rolling in and suddenly disagreements begin to surface, perhaps derailing the negotiations.
Create a Timeline
In some instances, there are factors necessitating an immediate sale of a business, but in other cases, a sale may simply occur due to the fact that a good opportunity presented itself. In either scenario, it is always wise to have a clear timeline in place for the completion of the sale. When there is no concrete end date in sight, negotiations can simply go round and round. And, as more time passes, there is a good chance that something will come up, either within the business or maybe within the larger economy, that could stall or alter the deal terms. Once the decision to sell has been made and everyone is clear on what they want, the creation of a deal calendar can help ensure that things move along.
Determine Your Value
One of the trickiest or most contentious aspects of many business sales relates to the calculation of valuation. In far too many situations, valuations can be drastically overstated, sometimes intentionally, sometimes due to excessive optimism, and sometimes due to mere naivete. Figuring out a company’s valuation can be accomplished in various ways, and companies must be prepared to show how it is they came up with their figure. If a company ends up displeased with the quoted number and/or the parties cannot agree upon the right number, it could be a sign that it is not the right time to sell, or perhaps that expectations must be tempered.
Get Sound Advice
Selling a business is an important decision and is often a lengthy, complicated transaction. Thus, leaders must seek the advice of seasoned professionals before making any decisions. Of course, there is a very good possibility that the company leaders are not going to like everything that the professionals have to say regarding a potential sale. But, that is precisely why it is important to get their perspective. Ideally, the leadership team will seek the input from one or more trusted advisors who will provide a realistic, objective assessment of the path forward.