If you want the best chance of gaining the highest price when you exit and sell your business, you need to have a strong exit strategy example to reference. Here are my top 3 tips.
De-risk the business
Have a strong team in place
Have the business under management
1. De-risk the business
The business is most valuable when it’s not key person dependent.
In any business where there’s dependence on key people for the success of that business, it devalue’s the business because it requires key personnel to operate it.
That’s why McDonald’s was so valuable at their peak, because you could get it run by a 15 year-old.
If your business is key person dependent on you, this is going to potentially tie you to the business when you sell it.
Not only will the business be worth less, but there’ll most likely be a buyout period where you’ll still have to be in the business for a certain period of time, and in most cases the payments are structured to ensure the profit and revenues are maintained at a certain level in order for you to get your full sale price.
That might be helpful if you’ve got a business that can only be sold through vendor finance.
2. Have a strong team in place
It’s really important to remember, you’re not just selling the business you’re selling the unit.
By the unit I mean you’re selling all the operators within that, the stronger the team you have in place the more valuable the unit becomes.
You’ve got to think of it like an investor.
Instead of buying a portion of a property, one apartment, you’re buying the whole apartment block.
What I’m looking for when I’m investing, I’m less concerned about the market, the product, the number one thing I’m most interested in is the people, the team and the culture.
To me, that’s where the real value sits.
In situations where you’ve got a transaction going on, you want to know you’ve got a strong team in place, that isn’t key person dependent, that can manage the exit of the owner.
3. Have the business under management
If you have the business under management and you’ve got a good team then you’ve actually got a great offering to sell.
When you’ve got a going concern – that’s when your business is worth considerably more.
The reason is, you’re not actually selling something that requires someone to come in there and operate it.
You’re actually selling something that an investor can buy and park their money in and it’s going to run for them.
And now, in order to do that effectively, you have to have good contracts in place with your team, a good team in place and good relationships.
They’re my top 3 tips for exiting your business for the highest price.