Most business owners don’t start with an exit in mind.
They start with an idea, a customer need, or a gap in the market. Once we get the business off the ground, our efforts go into building it into something. It isn’t normally until many years have passed that we start to think what an exit might look like – and that’s often prompted by change rather than planning.
So, when is the right to think about it all?
Give yourself time
The right time to sell your business is a personal decision, and there’s no such thing as a single ‘right time’. Unless you’re lucky, it’s unlikely that you’ll be able to make the decision quickly – it’s rare for buyers to come along and offer you the exact number you were thinking.
Instead it’s better if founders and business owners have a reasonable runway for what an acceptable exit will look like for them. Businesses have to get themselves ready for an exit, minimising founder dependency, rigour around governance, consistency in their financials and performance.
You might want to think about an exit in five or even 10 years’ time, but having a plan that helps you prepare for business exit should already be in your roadmap.
How can good businesses access their full value?
For some businesses, a direct acquisition will be a suitable exit, but for others, a standalone valuation will leave you a good degree shy of the value you want. Where growth is incremental for a business, buyers will often apply conservative multiples, and strategic buyers are selective, and often opportunistic.
This is where M&A can open up a broader set of outcomes.
Opening up your options
Well run businesses whose numbers can stand up to scrutiny can think about M&A wrappers as an opportunity to access higher valuations. Sitting alongside similar businesses either in the same sectors or in the same industry gives you a higher EBITDA and increased potential in your business opportunities. This is attractive to buyers.
We have a number of industry wrappers – across construction, performance marketing, IT and others – that have been able to collaborate on business deals and cross-refer internally, as well as participate in an M&A wrapper. Our clients create governance frameworks in anticipation of a sale, and some owners opt to stay, while others want the exit event.
Instead of leaving yourself frustrated and with one limited options, start thinking early about how, what and when an exit event looks for your business. If you’re impatient to sell, you’re missing out on better opportunities to get a satisfactory exit. Start preparing yourself and the business early, and give yourself the best shot at the best outcome.