The 5 D’s of Exiting a Business
All businesses will exit at some point. The question is whether it will be on your terms or not. Selling a company at top valuation is an ideal and exceptional way to exit, but there are many kinds. There are five common reasons a company dissolves or is sold. They are often referred to as the 5 D’s of business exits.
Exiting can be an emotional experience for many entrepreneurs. Imagine trying to navigate that important transaction under one of the 5 D’s above? In order to exit the business on your terms, for the highest valuation, you need to start thinking about your plan today. Even if you are 5 or 10+ years away from even considering the sale of your company, there are many critical things you can be doing today to set the stage for a successful transaction.
The good news is that there are a lot of similarities between companies that are setup to sell, and companies that are simply just well run and give the entrepreneur a lot of freedom. Many of the value drivers at the time of a sale are things, that if setup correctly, will make your life and the lives of your employees much easier anyway.
Think Like a Buyer
So what should you be doing today to prepare for an exit on your terms? Think like a buyer.
If you were planning to deploy capital to purchase a company, what aspects of the business will be important to to you in order to mitigate the potential risk of that investment? There are a few key things to put in place as early as possible so show massive value in the minds of potential buyers.
- Have proper systems and processes in place that offer predictability and consistency.
- Have steady recurring revenue sources.
- Make sure the entrepreneur is not needed in order to run the day-to-day operations of the business.
- Track and report KPI’s regularly.
- Clean and organized Financial Statements.
If these things are not currently in place, it’s not too late to get started! The best time to start preparing for an exit is now. Focus on improving the value drivers that buyers will be looking for, aim for consistency and predictability quarter over quarter, and make sure that you, the entrepreneur, is redundant. Over the next few weeks, we’ll be sharing additional expert tips on how you can get into the mindset of building your business with a strategic exit in mind.
In the meantime, please download our free Whitepaper entitled Seven Traps Sophisticated Buyers Deploy Against Unwary Sellers. This Whitepaper outlines the most common tactics that Private Equity Firms or other experienced buyers use to intimidate entrepreneurs who are going through this process for the first time.
We are passionate about making sure entrepreneurs get to experience a smooth and profitable sale of their business. From maximizing your valuation through the scaling process, to the final stages of taking it to market, we would love to help you. We offer growth strategy coaching, as well as exit advisory services.
Please contact us to schedule a call where we can discuss your specific needs.