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Selling a Business - Strategies for a Successful Exit

November 25, 2013

Selling a Business - Strategies for a Successful Exit

Synopsis
2 Minute Read

Planning to sell? Here are just a few of the considerations you should plan for to help maximize the value you get for the sale of your business while ensuring its success after you've exited.

Brett Franklin
Brett Franklin, CPA, CA
President, MNP Corporate Finance

If a sale is a part of your exit plan, there are a number of things you can do to help get the highest possible price for your business. This involves preparing your business in advance of a sale, understanding what drives the price of your business and having a plan to market the business.

When succession planning is done in advance of the actual transition period, owners have adequate time to structure the business so it is appealing to buyers. One very important aspect is to evaluate the operation and look at ways to reduce enterprise risk and increase profitability, which in turn drives up the value of the business. For example, businesses that depend on just one industry, have one client that accounts for more than 20 percent of their business or are very cyclical are often perceived as too risky for a buyer to pay a premium for. In addition, you should establish a vision for the future and document it in a strategic plan. Buyers like to see that the management team or leader knows where the business is headed and how to get there.

Understanding the factors that can influence price will also help you prepare. These include market conditions, the value of the income generating assets of the business, the length of time the owner is willing to stay on to transition the business to new management and the deal structure (asset or share sale), as well as the type of consideration (vendor financing, contingent payments or rolled equity).

The sale process is complex. Having a plan in place to market the business is critical to obtaining the highest possible price. Start by making a list of all the potential buyers. The list should include both strategic buyers as well as financial buyers if the size of the business warrants it. Next, try to make contact with as many buyers as possible. Ultimately, the more buyers competing for your business, the higher the price will be. You may want to consider having an advisor assist you in the process to ensure confidentiality. As you move from making initial contact to obtaining offers and closing the deal, following a pre-defined strategy will help you get the price you want.

Being prepared in advance and following a well-defined strategy throughout the sale will help you feel more in control of the process and obtain the most money for your business.

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