Selling your company is a big turning point for business — but it can be either high reward or high risk. However, there are many steps you can take to reduce the chance of failure on the way out.
A business exit strategy is a business owner’s plan when selling the ownership of their company to another company or investors. A good strategy will ensure they maximise the value on exit. For a surefire strategy, here are the top five things you should consider when planning a foolproof business exit.
Management Team
Business operations can be rocky after a drastic change, especially after a company sale. To keep things afloat, it’s good to hit the ground running by building a strong management team to run your business from the get-go. Management usually compromises of a Managing Director, a CFO, an Operations or Sales Director and an HR Director who will all work closely alongside you as the business owner. You should ensure you have a clear understanding of what each role does and what responsibilities they each have. This knowledge will help you choose the right people for your dream team.
If you’re a small business, SME, or start-up, you may want to consider hiring a virtual CFO initially. By outsourcing a financial professional, you’re still getting the same high level of expertise as you would from an in-house position but at a fraction of the price. Outsourcing a CFO can offer you a wealth of services and reliable insight that will maximise your company’s value when the time is right to sell.
Operations and systems
To ease operation, it’s important to set up and reinforce systems that will benefit your management team. Dependent on the type of business you run, this could include an automated accounting system, a CRM system, stock or ERP systems, an employee manual and/ or a marketing and sales procedure. This also helps with transparency during the business acquisition process, as it reflects good organisation and structure of the company.
It is a great opportunity to revise any outdated systems and make the switch to digital if necessary. Computerising your operations comes with a range of benefits and will, overall, improve the efficiency of your business. Shifting all paper documents onto an online database will make accessing and recording information much easier. This is vital if you are selling your company as keeping a paper trail of historical data will strengthen your business’s worth.
It is important to ensure that you have good processes adopted to all systems, as systems do not fix bad processes — for example, a stock system is only useful if you have a process where stock is added to the system in a timely manner.
Bookkeeping
To guarantee a great business acquisition, make sure to have a thorough review of your financial records — both past and present. You can start by reaching out to a competent accounting firm that specialises in business management to conduct a professional review of your financial accounts. This will accurately assess your business’s financial health, its potential for growth, and the feasibility of a successful sale. Afterwards, it’s then important to comprehensively go through the results and to address any issues that have been detected.
Through accurate and up-to-date bookkeeping, areas of weakness can be exposed before selling your business — this includes accurate stock records, any due invoices, backorders, payroll deductions, liabilities, taxes due and more. In general, better documentation of expenses will help during every stage of a business acquisition and will also influence the value of your company.
Professional support
Reaching out to a business accounting firm could be key to a successful company sale. A business acquisition should be mutually beneficial for both the parties involved, the buyer and the seller. Using an accounting and CFO team can provide you with critical advice to ensure you get the best possible outcome out of the exchange while maintaining market integrity. As well as strengthening your business exit strategy, a professional accountant can give very useful insight when developing a disaster recovery plan in the case of an unsuccessful sale.
A professional can also help you with conducting a valuation. A business valuation will reliably estimate the value of your business to ensure you are selling it on fair terms and for what it is accurately worth. If a valuation flags up any areas of concern, this will impact the amount a buyer is willing to pay. This could be due to a slow turnaround on inventory, the business is still owner-operated with no management team, poor financials or limited growth compared to other competitors selling. Not only will a professional accountant conduct a business valuation for you, but they can also break down its outcome and guide you through resolving these issues to raise the value.
Employees
As this will be a period of great change for your business, it’s important to keep your employees up-to-date during the procedure and to provide transparency whenever possible. Selling a company may dissuade employees from continuing to work at your business, with the worry of redundancy and job insecurity. Retaining key staff is critical to the stability of your business, so it’s important to have them involved in the business exit decision. For example, your operations director can demonstrate the systems and procedures of your business, while the sales director can provide potent sales projections. Their insight can be invaluable during the decision-making process.
Additionally, you should also take your time in finalising stay agreements for your employees. A stay agreement is a legal document that states the terms and conditions under which an employee may leave. The agreement can outline incentives that will hopefully stop important staff from leaving. You should review all employee policies to ensure your company is in compliance with the law and that there are no legal complications. This is also a great chance to review all insurance policies to ensure they cover all areas of risk in the case of the sale backfiring.
There is a lot of planning that goes into an business exit strategy, and these are just five pieces of advice to consider as you plan your exit. There are plenty of things to take care of when selling a business, but taking into account these key factors will help you to focus and make important decisions later on. While it can be an overwhelming process, hiring an expert to guide you through the process can objectively ease the burden. At Wilkinson Accounting Solutions, our team of professional accountants can provide you with discerning advice you can rely on for a successful business exit.
To learn more about our accounting services, business exit consultancy and business exit planning for businesses, get in touch with us today.
