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Apr 27B2B CFO

Business Transition Factors for Success: Your Exit Strategy and How to Prepare

Apr 27B2B CFO

One of the first questions I ask a new client is what their exit strategy is. More often than not, I get a response that goes something like: “Why do I need to start thinking about my exit strategy? I am young and not anywhere near ready to think about selling!”

While I understand this answer, I also know that we never get to know what is going to happen in life. I have seen so many business owners ill prepared for this eventuality, and then something tragic happens and their family is left trying to figure out what to do next. I have also seen many business owners never plan for an exit, and then all of a sudden they decide the time is right but can’t understand why they just can’t get the price they want.

Hope for the Best, Plan for the Worst

I understand that preparing for a future sale – especially if it is hypothetically many years away — rarely feels urgent. Other priorities come into play, and CEOs don’t often take on the task of building skill or knowledge around how to exit until the event is upon them. Unfortunately, this attitude dramatically increases the risk of having to accept an unattractive offer.

In order to help increase the potential for a successful transaction, business owners should start planning their exit strategy as soon as possible, ideally at least three to five years in advance. Owners and partners need to determine well in advance what needs to be done before a sale is initiated.

Plan Ahead for Growth

Future growth is reliant on processes, systems and controls. As the CEO of your company, there are several areas that you should be looking at in depth. Examples can include:

  • Identifying the key drivers that will increase the value of your business, and putting them to task
  • Looking at sales concentrations, and deciding whether it is necessary to diversify customers, products, or regions
  • Understanding your EBITDA
  • Benchmarking your business to industry standards

Being able to look realistically at your company’s leadership in an objective way may also be something to consider. If you find that support in certain areas may be lacking, perhaps it is time to bring in an expert, or allow somebody else within the organization to step up. While stepping back, changing roles or handing over the reins to another may not be easy, sometimes it is necessary for the good of the organization. Ultimately, a well thought-out move such as this might be the best thing for your company and its culture.

If any of these concepts strikes a chord with you, please drop me a line  because I would love to chat with you on the subject! You can email me here at any time, day or night.

photo credit: Cerillion Calculator – Billing via photopin (license)

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