Our Blog
Good Exit Planning is Much More Than Just Hanging a 'For Sale' Sign
Written By - Erin O’Leary
Exiting your business successfully requires careful planning and preparation.
I recently had an attorney make an offensive comment “Don’t worry Erin, you will get your success fee – you introduced the two parties.”
Did you know that you can essentially reverse engineer your business’ enterprise value? And though it is determined through a variety of inputs, getting a valuation and the insights of a professional M&A advisor is key.
Implementing insights from the quantitative and qualitative valuation is key for best results.
- Focus on Value:
- Buyer Perspective: Understand how buyers evaluate businesses: strong profitability, consistent cash flow, and a well-managed team are paramount.
- Financial Health: Clean financials, accurate accounting (accrual basis), and a focus on SDE and EBITDA are crucial for attracting buyers.
- Market Analysis: Analyze market conditions and adjust your timeline accordingly. A strong market and low interest rates maximize your chances of achieving the best price.
Long-Term Preparation:
- Three-Year Window: Allow ample time to improve financials, enhance operations, and prepare your team.
- Address Key Concerns:
- Revenue Diversification: Reduce reliance on a few key clients.
- Expense Optimization: Ensure all expenses contribute to business growth.
- Management Succession: Develop a strong management team capable of running the business independently.
Valuation and Pricing:
- Understand SDE and EBITDA: Accurately calculate free cash flow to determine your business’s true value.
- Market Research: Research industry and geography specific valuation multiples to set realistic price expectations.
- Improve Profitability: Increase earnings to maximize your selling price.
Due Diligence:
- Clean Up Your Records: Ensure financial records are accurate, complete, and easily accessible. (Also accrual based and GAAP rules apply.)
- Professional Guidance: Engage with a CPA and consider a professional audit or review level quality of earnings add credibility.
By diligently preparing your business for sale, you can increase your chances of achieving a successful exit and maximizing your return on investment.
This version emphasizes key takeaways and uses shorter, more impactful phrasing while maintaining the core message of the original text.