When it comes to Exiting a Business two things are a given – you will either outlive your business, or your business will outlive you. 

When planning an Exit a business owner needs to remember that Time is not on your side and Hope is not a strategy.   So what do you do?

You need to determine your objectives and timetable.  By creating clear goals, you will have taken the first major step to Exiting your business.   That being stated, a successful exit strategy requires three key components:

• The company is ready to sell
• You (the owner) are ready to sell
• The market is ready (the market was pretty brutal in the last two years – especially for those businesses with real estate components attached to them)

There are commonly six ways owners will exit a business:

• Close it
• Via Buy/Sell Agreement
• Sell the business
• Accident, Death or Illness
• Liquidation scenarios
• Family/Key Employee succession

As a part-time CFO, I work with my clients to plan like they will sell the business in three to six years while preparing like they will need to sell the business tomorrow.  I do this because waiting until the 11^th hour is not the time to create value in a business. 

As you think about selling your business, whether now or sometime in the future ask yourself the following:  Who can run the company in my absence?  I own the business, but am I the business?

I am currently the part-time CFO for a business where the owners are the business as well as a business where the owners are not the business and are planning to sell in less than six years.  One of these companies is committed to a liquidation event when they exit the business (part of their original plan), the other is trying to maximize value today for the inevitability of a sale in the future.

When planning to sell you must analyze the real issues in the business that center around, Succession Planning, Personnel, Capital, Concentration (revenue, supplier etc.), and  Risk assessment.

So enough about Sellers, what do Buyers want?  They want systems and procedures in the following areas:

• Human Resources
• Finance and Administration
• Operations
• General Policies and Procedures
• Special Issues specific to the business

As part of the Pre-Diligence Analysis the Seller should focus on:

• A/R Quality and Turns (see my blog I owe I owe well what’s your  DSO?) http://www.b2bcfo.com/partners/show,i-owe-i-owe-well-whats-your-dso.html/Itemid,0/
• Inventory valued fairly
• Key Man Life insurance
• Tax Considerations and minimization analysis
• Projections (I’ve seen sophisticated buyers buy hockey stick projections – however it is not commonplace - so stay realistic)
• Stable revenue and profitability trends
• Future Capital requirements
• At least two years of audited financials (preferably more)
• Prequalifying the Buyer’s financing
• Business Report card
• Business Valuation

So once you have maximized the value of your company, you will be ready to sell.  Selling has a lot of moving parts (Commercial Lender, Financial Planner, CPA – Tax Advisor, Valuation Consultant, and Transaction Attorneys) – I caution you not to try and manage this process yourself.   You would be wise to consider a quarterback to manage and to keep on task these moving parts.