After founding or backing 30+ companies and executing several exits, I’ve learned that the difference between a good sale and a great one isn’t just luck. It’s based on detailed planning and grooming the business for sale properly, well in advance. Some crudely call this process “Putting lipstick on the pig!”
Most entrepreneurs wait until they’ve got a buyer tapping them on the shoulder before thinking about these issues, but by then, it may be too late. The time to prepare for your exit is long before you meet any potential purchasers.
Have I pulled most of the levers?
Be honest with yourself – have you extracted most of the value from this business, or is there still low-hanging fruit? If you can see clear improvements that would take 6-12 months to implement and would result in a material uplift in profits, then you may well be selling the business too early.
The flip side of the same question is that if you have already pulled the major levers and the next phase looks gruelling – competitors taking market share, markets shaky, system upgrades necessary, overhauls, complex hiring – that might be someone else’s opportunity, not yours. Management fatigue is real. If you’ve lost the energy to drive the business forward with intensity, then it’s time to sell.
Am I leaving something on the table?
Counterintuitively, you should always leave something for the next buyer. A business that looks like it’s been squeezed dry isn’t attractive. Buyers want to see upside potential – opportunities they can exploit that you haven’t tackled yet.
Unexploited sales avenues, costs that can be cut, margins that could be increased etc. These are all aspects of the business that could be considered opportunities for a buyer, not failures. You can turn these negative features into selling points.
How should I groom this business for sale?
Perhaps start 12-18 months before you want to sell and focus on the metrics that buyers care about.
- Customer concentration — if your top three clients represent 60% of revenue, that’s a risk flag. Try to diversify your customer base before you sell if possible.
- Depth of management — a business that can’t run without you is worth less than one with strong second-tier leadership. How can you develop and empower your second-tier people to take more responsibility?
- Sector fashion — is your industry drifting in or out of favour? Selling into a rising market will usually earn you a better multiple.
- Cost stripping opportunities — if a buyer could slash 20% of costs, then you’re leaving money on the table. If you strip those costs yourself first, you could increase the sale price by a multiple of these savings.
Am I prepared to accept an earn-out?
Many buyers will want you to hang around for 12-24 months as part of the deal, which may be contingent on you hitting targets or profit levels. Decide your position before negotiations start, not when you’re tired and emotional and halfway though.
How will I feel when I sell my baby?
Don’t underestimate this. It’s no time for entrepreneurs to become emotional or sentimental about what they’ve created. If you’ve decided to sell, then it’s mostly about achieving the highest price. Of course, you’ll want to be loyal to your staff, but your greatest loyalty is to yourself. You’re the one who has taken all of the risks over the years.
Who’s helping me?
This is not the time to rely on old contacts. You need the best broker and the best lawyer you can afford. A skilled corporate finance team can add 20-30% to your exit price through proper positioning and competitive tension.
Who will run the business during the sale?
Once you’re in sale mode, your focus shifts to due diligence and negotiations. Meanwhile, the business needs to keep performing, or the buyer may well get spooked.
As we’ve already discussed, you need a strong management team that can keep the ship steady while you’re distracted. If they’re not in place yet, you’ve still got time to coach them or upskill.
What about tax?
If you haven’t structured properly from day one, there’s limited room now. But there are still strategies you can implement, perhaps timing the sale across tax years, using reliefs and considering earn-out structures that defer income, or loan notes. Take specialist tax advice. In my own experience, moving abroad to avoid tax isn’t as glamorous or easy as it’s portrayed.
How will you communicate the deal?
Nothing must leak during the sale process. Fear, uncertainty, and doubt spread fast. Staff whispering in corridors, worrying about their jobs, updating CVs instead of working – all of this damages performance and can ruin deals.
Have a communication plan ready for when you announce, both internally and externally. It’s important to all parties that the deal “lands well.”
What will you do next?
After many years of building a company, selling often creates a void because the business has defined who you are. Have a plan. For me, it’s finding the next opportunity to deploy capital and experience. For others, it’s travel, family time, or new challenges.
When you’ve all signed the documents and the money is in the bank, don’t forget to celebrate. You’ve earned it. You’ve built something valuable enough that someone wants to buy it. That’s an achievement most people never reach.
Gary Ashworth is Chairman of Albany Beck and author of “Double Up Money Mastery,” and runs Dumm.org.
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