You wouldn’t run a marathon without being properly prepared, so don’t take this approach to selling your business.
As a business owner, the worst thing to do is rush into an exit, even if the exit is years away, if you know it is coming, start planning now. The strategies below aren’t overnight fixes, they can take months or years to fully get right, so start thinking about them now.
✅ Consider areas you need to de-risk, for example, customer or market concentration – this might be great for cash generation as a business owner but screams risk to a buyer. Take some time to diversify the business by adding new customers or new markets to limit concentration risk.
✅ You might be ready to exit, but is the business ready? If your business can’t run without you while you go on holiday, there isn’t a clear exit for you. Probably the most time-consuming part of ensuring the business is ready for exit is building up a strong second tier management team who can take the business forward. This will really open up the buyer pool. It is very rare to sell to a buyer who has a very similar business and has someone there who can completely replace you very quickly.
✅ Spend some time thinking about the kind of metrics that a buyer will want to see. For example, it can be common that businesses don’t track margin on a granular basis, whereas this is something that due diligence providers get very excited over. Implement a system of tracking margin by product, service line, customer etc. The more detail you have, over a longer time period, the better. Quantify Advisors do a lot of vendor assist work to help business owners get their financial information ready for diligence.
✅ Good housekeeping – make sure everything is neat and tidy from a legal perspective, e.g. if you operate under contracts, make sure they are all signed and up to date.
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