Business Exit Planning for Owners Who Want Their Sale Price to Hold Up

We had a client recently who sold their business for about double what they thought it was worth. When we first began conversation with them they were exhausted and ready to exit the business. When we explained the value of just another two years to build up the value prior to the sale, they decided it was well worth the effort to create the ‘first class’ retirement they now enjoy.

The sad fact is that most business owners overvalue their business, due to their emotional, time and money investment over sometimes many years. On the flip side a potential buyer looks at it as a cold hard business transaction that needs to deliver the right return on investment. Unfortunately there is often a big gap between the two numbers. There is a great opportunity to build up the value someone is willing to pay if the business is set up with a business sale in mind. When a business is in severe Cash Flow stress, this is a very useful tool. It enables you to manage the situation on a daily basis. You can see when you are able to pay people based on the daily balance. It shows where you need to speed up funds coming into the business e.g. chase customers for payment or inject funds from shareholders or outside lenders/investors.

Due Diligence is analysis that is performed by someone looking to buy a business. It delves into just about every aspect of the business with particular focus on financial results. During this process buyers are looking for reasons to reduce the sale price for the business. It pays for sellers to do their own Due Diligence well beforehand to fix any issues that could have a negative impact on the value of the business.

You then need to put in place a process for proactively managing these ‘levers’. Each one needs a project of its own and someone in charge of it to ensure it happens and they are accountable.

Your Cash Flow Forecast is your ‘bible’ for improving Cash Flow. It’s the proof in black and white on how things are progressing.

Exit Planning is a big job. If you want to get the best value when you sell your business and a smooth handover to new owners it needs serious planning and implementation. There’s an old saying “You can’t sell your head!” Many business owners have all the knowledge in their head and they need to extract that knowledge into systems that can easily guide others to run the business. Often a final payout for a business is dependent on a smooth handover so you don’t want to jeopardise that.

We often find money sitting in the wrong place i.e. not in business bank accounts. There are quite a few places it can be. We’re happy to discuss them with you and help you to move the funds more quickly into your business bank account, so that you can more easily pay all your expenses and grow your business more efficiently.