Exit Stage Right

You may or may not have ever thought about the end - the time when for a number of reasons you would like to sell your business. The frightening thing is, is that you are not alone - the majority of business owners haven't either - but if you would like to get 4 times your EBIT for the sale you need to be thinking about this now...

I met a guy who had run a very successful business for 30 years turning over approx. $30m p.a. and with a profit of $2m pa. His wife had worked in the business with him but she was keen to spend more time travelling now that they were hitting their sixties. So in theory, the sales price should be close to $8m - the problem was everything was in his head, there were limited detailed processes or employee records. His business was significantly devalued as a result and he is likely to walk away from it and not recover the pot of gold at the end of the rainbow. So what can you do to prepare for the end?

1. Systemisation - every process, procedure and practice - so that someone else can pick it up and run with it and the business is not totally dependent on key personnel. This activity will also protect against attrition

2. HR - have detailed personnel files and contracts, job descriptions and annual reviews. Your employees are often part of the transaction and the potential buyer will want to understand their skills, annual leave and long service leave liability plus the performance records that they will inherit

3. Practice run - know that your business can run without you for extended periods of time - take some lengthy breaks, try and switch off and then come back and learn from the experience - what were the issues and how can you protect against those issues in the future?

4. Plan & prepare early - look to maximise your profits in the three years leading up to your sale but, more importantly, start an exit strategy document now to think through issues such as prospective buyers, financial and legal advisors and, importantly, your life post the sale. Any prospective buyer is likely to complete a thorough due diligence review too

It is really important that you start your business with the end in mind - sounds counter intuitive I know but it will also help with the everyday business decisions if you are always linking decisions, strategy and operations to the day of exit.