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Exit Strategies

Readiness Roadmap
Preparing for the exit is an evolution that begins when you open your doors and continue to grow your brand.

However, once you start to seriously consider the inevitable exit, you will need to put the focus on enhancing key aspects of readiness. The following four documents or processes should be fully developed before going to market:

1.Develop a thorough business plan.
Your business plan will provide the roadmap for potential buyers to evaluate how your business will meet their goals and objectives in this deal.

2.Maintain well written and organized policies and procedures.
Policies set the standards and help guide employee performance. If you have processes that are unique, they become part of the reason for determining your value proposition.  Putting this down on paper will show the buyer you are a top tier organization.

3.Maintain complete and accurate books and records.
The time you begin to market your business for sale is not the time to start maintaining complete and accurate records. Start keeping “clean” books yesterday. Work with a knowledgeable CFO/CPA who understands concepts such as GAAP, COGS, revenue recognition, treatment for leases, etc.

4.Have financial reports for the past three years.

The balance sheet and income statement together make up the key business financials. Being able to tell a healthy growth story is key to getting top dollar. The numbers placed on paper should highlight the key drivers of performance.

Go to Market Roadmap

To get top dollar for your business you need to bring forward the value proposition.

Revenue leads the way. Can you put together a proforma profit and loss statement that shows strong revenue growth? How do you support your position? For example, Have a historical trend analysis of your top selling products that grew exponentially due to brand recognition.

Highlight those expenses that are under control or even declining. Be sure to remove non-recurring costs to show buyer the true picture of expenses they will inherit.

You should hire a professional to correctly value your tangible and intangible assets. This group should have the expertise to identify the intellectual property to be valued and highlighted as part of the sale.

Going through the valuation and proforma development should result in your understanding of your business’ worth and expected sale price.

The final step before closing the deal is the completion of due diligence. This will assure the buyer of the accuracy of your assessments and disclosures.

Due diligence plays a central role in the process, which is in essence, is an audit of your business. Depending on the size of the deal and if structured as asset or equity purchase, the buyer may require the due diligence to cover every aspect of your business to properly assess synergies.

The CPA hired to complete the financial assessment will request the readiness documents, along with proforma and any other documents to show how you determined your valuation.

The CPA will assess the revenue and expense synergies, to convey the value creation proposition to the buyer.

Delays in the process can kill the deal. It has been our experience in helping buyers with their due diligence, that the level of preparedness directly impacts negotiation.