Heading for the ExitSeptember 17, 2014
This month, Rupen Kotecha, Regional Director of the CFO Centre has given us advice on how to maximise value and minimise sale problems when exiting a business.
By: Rupen Kotecha
Question from a business owner:
A business friend of mine has just seen his company sale fall through for the second time in two years. I was planning to exit my own business within the next three years, but my friend’s experience has put me off. What do I need to do to make sure I don’t suffer the same pain?
Your friend’s experience is not uncommon, but can be avoided by thinking ahead, getting the business in the right shape to maximise value and minimise sale problems, and making sure you get strong project management skills for the final exit process.
I would always advocate an approach which “starts with the end in mind”. The more time you’ve got the better. You need to create your exit plan. Start by considering:-
- What’s the minimum value you want to realise?
- What’s the minimum value you need to realise?
- Do you want a total exit, or would you be happy with an ongoing involvement?
- Invest a small amount of time and money in “up front” advice to understand what your business needs to deliver in financial terms to achieve the exit values for you personally
- Also consider the “shape” of what your business needs to look like to maximise value. Potential buyers will need to see a clear vision and forward strategy for the business, a strong, well balanced management team (that isn’t too reliant on you), sound personnel policies and procedures, employment contracts that are up to date and in order, a good record of your customer contractual arrangements, an excellent health and safety record and no environmental issues. From a buyers perspective it’s about minimising risk. Put yourself in their shoes.
Getting the Business in the “Right Shape”
The key message is DELIVER. Most exit plans fail, not because there is anything wrong with the plan, but because management don’t execute plans effectively. To avoid problems later, you must enhance BUSINESS PROCCESSES, change ORGANISATION STRUCTURES where necessary, get the right PEOPLE on board, and deliver the right RESULTS.
If you’ve thought ahead, got the business into the right shape, and delivered on those plans, the final exit process should be much less painful. Critical to this final stage is getting the right advisors on board to make sure you realise maximum value and get the right deal for the business and those who remain in it. Some pointers:-
- Make sure your exit forecasts are rock solid, otherwise they will be used against you to chip price.
- Get your management thoroughly prepared to deliver great exit presentations – it can add millions.
Following the approach outlined above will avoid the problems your friend has faced, and hopefully yield a spectacular result for yourself!
CFO Centre provides high calibre CFOs to SMEs on a part-time basis. Whether the business in in fast growth mode and needs control, has hit a brick wall and needs survival solutions, or as an owner you need assistance with an exit strategy, our CFOs have experience and knowledge to assist and implement each situation.
For more information about the CFO Centre’s services go to www cfocentre.com.au or call us on 1300 447 740
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Rupen is a strategically and commercially minded UK qualified Chartered Accountant now based in Perth. He has extensive experience in the aviation and freight industries as well as in the field of logistics. He spent three years as CFO on the Board of British Airways Regional Cargo and has advised on restructuring, merger and disposal of businesses. Prior to this he worked as CFO for an international logistics and supply chain company. He was responsible for running their UK, Hong Kong & China business units. This included setting up JVs in Hong Kong. He has also worked as a business analyst for a management consulting company with exposure to the likes of Shell, British Gas and Ford. In addition he has had further international exposure through Herbalife Europe where his work included assisting businesses in The Netherlands and Norway. Over his career to-date Rupen has acquired invaluable knowledge and experience of the problems and opportunities facing large and small businesses in sales, operational and financial areas.
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