Exit Preparation
When it comes to contemplating an exit and to sell the company you spent years building, the process can be daunting. While you divert time and attention to such a project, even at the preliminary stage, you will need to continue to run your company at the same level of skill and dedication. What should you do to prepare? What are the drivers of value you should focus on? How can you maximize value to get the best price? What steps should you take to make the transition smooth for your employees and customers? What is our Freedom Point and how do you get there?
As an owner of a privately held company, you understand the importance of a thoughtful plan. We can help you evaluate the available exit strategies and develop the critical set of plans to get you to your Freedom Point. Timing of a planned exit can be as important as the underlying financial metrics. We may advise on an expedited sale or a delay in a marketing and sale as we help you evaluate the risk/reward trade-off to determine the best course of action for your specific case.
Organize the Financials
To command a premium price, you’ll need to demonstrate profitability, a solid revenue stream and growth potential. Any potential buyer is going to want to see detailed financials and compare them to benchmark data from within your industry for determining the valuation.
Strengthen the Management Team
Managers are part of your company’s value. These human assets are critical to ensuring a smooth transition of your company to new ownership. Recruit new people if necessary or incentivize your existing team to stay on after the sale of your business.
Add Growth Potential
Prospective buyers aren’t solely interested in the current state of your business; they want to know it has future scalability. With the assets and human resources in your business, will they be able to enter new markets and increase margins for bigger profits? Recent growth and proof of scalability can have a dramatic effect on attracting a significant number of qualified buyers and a significant impact on valuation.
Create Barriers to Entry
The more difficult it is to start a new company in your industry, the higher the value of your company. Market entry barriers may include patents, licenses, established distribution networks, proven "sticky" customer relationships, proprietary technology and high capital investment requirements.
Reduce Customer Concentration
Is your company reliant on just a handful of customers? You can add value to your company by expanding your customer base. Find new lines of business or enter new markets. In most cases buyers want to mitigate their risk with customer volume and diversity. In those rare cases where a particular platform buyer or very specialized buyer is interested in that concentration, you will want to show that concentration to be so unique and strong that there is little or no chance of it being lost during or after a concentration, and you should expect a more significant earnout period and at-risk comp from the transaction.
Create Recurring Revenue
A business model that includes predictable, recurring income is highly desirable. If you sell consumables or have existing contracts with customers, subscriptions or auto-occurring sales, you can demonstrate guaranteed revenue, adding to your company’s value.
Optimize Your Exit Strategy
If you were selling your home, you’d make sure it looked its best before putting it on the market. You’d give it a fresh coat of paint, make any necessary repairs and perhaps do some landscaping for curb appeal.
Selling a business is no different. Before placing it on the market, you’ll want to maximize operational efficiency, profitability and consistency. With strategic planning you’ll attract more buyers and command a higher sale price. JPR Consulting can help you prepare for your exit – whether in a few months or years – to fully reap the rewards of all your hard work.
