“When should I start thinking about my exit strategy?” is one of the most frequently asked questions by business owners. The answer to this is always straightforward – It’s never too early to begin strategising your business exit. Isabelle Balch and Tracy Kingsnorth of Bluebox Corporate Finance look to answer this question in more detail.
While ideally, entrepreneurs would consider their exit strategy during the startup phase of their venture, most begin contemplating it 2-3 years before the intended sale. Even this timeframe provides ample opportunity to ensure your business is well-positioned and your affairs are in order.
Isabelle and Tracy explain that the key issues can be categorised into two areas, each requiring attention but neither demanding more than a couple of years to address. While these processes can be expedited, we recommend allocating at least a year to ensure all elements are properly aligned for the final push. There are two crucial areas to focus on.
Strategic Positioning and Value Maximisation
Positioning your business effectively is crucial for enhancing its value prior to exit. Remember, acquirers are investing in future potential, not just past performance. While historical data provides context, the growth narrative can be crafted to maximise appeal and value. This involves:
- Identifying and highlighting key growth drivers
- Developing a compelling future strategy
- Showcasing unique selling propositions and competitive advantages
- Demonstrating scalability and potential for market expansion
- Addressing current trends such as digital transformation and sustainability
Presenting your business in the right light requires expert insight. It’s about convincingly showing potential buyers that your business is primed for growth and aligns with their strategic objectives.
Preparing for Due Diligence
It’s essential to ready your business for the inevitable scrutiny of a potential buyer’s due diligence process. This comprehensive examination should not be underestimated. Some examples of key areas which can be overlooked include:
- Verifying ownership of all intellectual property
- Reviewing and organising key contracts
- Assessing and documenting staffing arrangements
- Evaluating and upgrading systems and processes
- Ensuring compliance with current regulations, including data protection laws
With guidance from experienced advisors, you can ensure your business is thoroughly prepared when you decide to initiate the sale process.
Recent statistics indicate that a significant proportion of business sales fail to reach a successful conclusion in the current market. By focusing on these two key areas, you not only maximise your business’s value but also significantly improve your chances of completing a deal.
In today’s dynamic business environment, factors like technological disruption, changing consumer behaviours, and economic uncertainties make early exit planning more crucial than ever. Start considering your exit strategy today, and you’ll be better positioned to capitalise on opportunities when they arise.
How Moore Barlow can help
At Moore Barlow, we provide legal advice that is built around you and your business. We put your needs first and give you a succinct explanation of complex legal matters so that you can act quickly and confidently to any opportunities that may arise.
We work with corporate finance experts like Bluebox Corporate Finance who deliver market-leading, pre-sale planning services to clients and also advise on the sale process itself. By doing so we help deliver the best service to our clients who are in the process of selling their business.
If you would like to discuss preparing your business for an exit please contact our Corporate law team.
