An M and A Consultant Considers Things BEFORE Devising an Exit Plan

M&A Consultant

My years as an M&A consultant have afforded me plenty of opportunity to work with business owners looking to sell their companies. Some of them started out with the express goal of building something that could be sold sometime in the future; others intended to work their businesses all the way to retirement. In many cases though, their exit plans didn't match their goals.

An exit plan is a strategy for selling a company and achieving particular goals in doing so. But as any small business broker will tell you, an exit plan is not as simple as listing a business for sale in the right directories. There's a lot that goes into preparing a business for sale long before it's ever put on the market. That's what exit planning is all about. To that end, there are three key things that have to be considered long before a company owner sits down to devise an exit plan.

Post-Exit Goals

The first things to consider are post-exit goals. Does the business owner want to continue receiving regular income from the business through minority shares? Does he or she plan to take a lump sum payment and invest it in a new venture? Will the profits realised from the sale be used as retirement income?

With all these questions come different answers and different strategies for reaching post-exit goals. A business owner who does not know what his or her post-exit goals are cannot reasonably come up with an effective exit strategy.

Expected Sale Price

I've witnessed many past scenarios in which business owners drain their companies dry in the months and years leading up to exit. As the thinking goes, they are going to take as much profit as possible out of the company so as to secure their own post-exit futures. That's fine if the business owner doesn't care about the value of the business at exit.

A good exit strategy accounts for how much a business owner expects to get for his/her company at the time of sale. If the sale price is to be maximised, the company must be maintained in a good financial position and with strong prospects. It cannot be drained completely dry.

Expected Buyers

There are times when a business owner looking to exit wants to make sure the company he or she has worked so hard to build ends up in friendly hands. The business owner may sell to children or grandchildren; he or she may sell to a loyal customer who has expressed interest in the past; the sale might be made to a good friend. If the business will be sold to strangers, that's one thing. If it's going to be sold to family members, friends, or a customer, that's an entirely different matter.

As a M&A consultant with years of experience, I can help you come up with a solid exit plan for your business. Let's talk about your goals and create a plan accordingly.

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Author: Tim Luscombe

Hello, I'm Tim and I'm a specialist in corporate finance for the owner managed business. If you've been approached to sell your business, or you are thinking of buying a business or you just want to know what your business ...