With more and more start-ups making headlines for multi-million-pound acquisitions by powerhouses like Facebook and Google, it’s unsurprising that many of today’s entrepreneurs are setting up their businesses with the ultimate goal of selling. Regardless of whether your chosen exit strategy is selling or an alternative, it’s important to plan well in advance when starting and building your business. Here, we discuss how to build your business with a view to selling as an exit strategy.
The value of an exit strategy
Having a proper exit strategy and adequately preparing your business for your desired exit can go a long way towards attracting prospective buyers and getting you the highest possible sale price. This is because preparing for a possible acquisition requires a business to function in such a way that it continuously maximises its value. Running your business with an exit strategy in mind also means that when the time comes for sale negotiations, your business will have everything in place to keep the buyer interested, streamline the completion of the sale, and keep the business running smoothly under the new owner.
Preparing your business for your exit
To develop your business with an exit strategy, it’s essential to keep focused on driving the value of the business. This means building the business’s assets, reducing its liabilities wherever possible, and taking steps to keep its market value high.
Showing consistent profitability
The first major indicator of a business’s value is its consistent profitability. This must consequently be a top priority for business owners hoping for a lucrative sale in the future. To this end, you must ensure that proper financial systems are in place to maintain a steady cash flow and keep your business out of debt. This may involve implementing a cash flow forecasting system, for example, or improving your invoicing system. It’s equally critical to pay all overheads on time and avoid falling into debt at all costs.
With profitability holding so much importance for prospective buyers, business owners should focus on building their company until it’s at its peak market value before selling. As such, entrepreneurs aiming for the eventual sale of their business should always be devising new tactics for fuelling profitability, such as diversifying the customer base, improving its product or service offering, and using creative marketing strategies.
Keeping meticulous records
As due diligence often constitutes the deciding factor in whether a buyer will move forward with an acquisition, businesses must take the initiative to facilitate eventual due diligence investigations. This means keeping meticulous records of all your business’s transactions, statements, and inventories.
All administrative paperwork should also be impeccably organised and readily available, including employment contracts, tenancy or ownership agreements, records of annual reviews, written grievances, and so forth. Not only is maintaining well-organised books and paperwork good preparation for a future acquisition, but it’s simply good business practice.
From the outset, you must carefully strategise to develop a strong, unique brand for your company. This is crucial, as a recognisable brand brings goodwill and customer loyalty while setting your business apart from its competitors. A strong brand can therefore significantly contribute to the value of your business and boost its selling price in the future.
When preparing any exit strategy or planning for a possible sale, advice and guidance from an experienced solicitor is of paramount importance. For more information or for expert advice on business or personal legal issues, contact us online at Carter Bond Solicitors today or call us on 0 33 33 44 44 11.
This content is not intended to be used as a substitute for specific legal advice or opinions. No recipients of content from this site should act or refrain from acting on the basis of content of the site without seeking appropriate legal advice.