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Top ten tips for preparing to exit your business

Setting your objectives:  While maximizing the value of your business is a common and important objective of the sale process, it isn’t the only one. Consider what else is critical for you to achieve, like maintaining the culture you built post-acquisition, making sure your employees are taken care of under new management, confidentiality considerations, etc.

Take your time and prepare properly: You will generally achieve a better result if you allow at least 6-12 months to properly plan for the sale of your business. This includes completing a number of pre-sale due diligence exercises including operational, human capital, commercial, financial taxation diligence, that will help you identify value drivers or risks in the business.

Look at your business from the perspective of a buyer: The most likely buyers of your business will typically pay the highest price; identify who they are and how they assess value so you can prepare your business to maximize valuation and competitive tension on sale. Note that the highest price doesn’t always mean they’re the right buyer to meet your overall objectives.

Make yourself redundant: If you are the key person running the business, you need to develop and put in place a succession plan that could include hiring a strong CEO/GM and support team who can prove themselves for at least a year prior to sale. This will give a future buyer comfort the business won’t fail without you.

Pay for some housekeeping: One of the biggest problems we see is a lack of investment in getting the business affairs in order; sort out financial reporting and accounting, separate the owner’s affairs from the business and tidy up legal, tax and operational risks.

Balance growth and profitability: Every sustainable dollar added to the EBIT or EBITDA figure is worth ‘x’ times EBITDA when you come to sell. Ideally, give yourself two years to realize profit improvement initiatives and demonstrate their sustainability to buyers. And while growth is important, don’t lose focus on profitability.  

Articulate and demonstrate a growth plan: Buyers will pay more if there are opportunities for future growth, such as new products, geographic expansion, or new channels; plan and partially implement these opportunities so buyers can believe them, and therefore be willing to pay for them.

Protect your sales proceeds: Any proceeds you make from selling your business will be after tax; make sure you have the right tax structure for sale. Also, draw up a wealth strategy for protecting your post-sale proceeds to meet retirement and succession goals.

Be prepared as timing can be everything: The strength of the M&A market in any given industry can change, and this has a large bearing on buyer interest and ultimately valuation. Get your business in a sale-ready condition as early as possible so you can respond quickly to changes in the market.

 

Above all, do your homework: You only get one shot at selling your business, so engage the help of professionals when required. Remember, selling your business is very different to running your business.

Contact us

Sabrina Fitzgerald

Sabrina Fitzgerald

National Leader for Private Clients, PwC Canada

Tel: +1 613 755 5904

Miriam Pozza

Miriam Pozza

Partner, Deals, Transaction Services Global and Canada Deals, ESG Leader, PwC Canada

Tel: +1 514 205 5286

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