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Why The Optimal Exit is Worth The Wait

By John Binkley

06/08/2022

“Patience is a key element of success” – Bill Gates

Success is something that rarely happens overnight. Sure, some may be lucky enough to find that winning lottery ticket or stumble into a game-changing idea, but I wouldn’t advise pinning your future on either of these outcomes.

Success is a process.

  • Establishing your business and guiding its growth
  • Building up your customers and clients
  • Refining your products and services and
  • Nurturing your employees

It takes a lot of effort, a lot of investment, and a lot of patience. However, that makes reaping the rewards at the end so much sweeter.

The patience you’ve relied on throughout your company’s life shouldn’t abandon you when the time comes to sell your business. Yes, of course, you could sell your business in a matter of weeks or months to an employee, partner or competitor down the street – it happens all the time.

However, these deals are often unfavorable to the seller. The price is lower than it could be, the deal structure is terrible, or they get stuck in an earn-out with unrealistic targets. All because they proceeded without questioning whether their business was truly ‘buyer ready’.

Building a buyer ready business takes patience – and as is often the case, good things come to those who wait.

Becoming buyer ready

Exiting a company is a process, not an event. While it all eventually comes down to the exciting moments of signing documents and shaking hands, this is only possible after months and years of careful planning, strategic and tactical growth, and clear guidance by an experienced M&A advisor.

Without utilizing  time and expertise, there are many ways that your exit can fail to fulfill its potential:

  • You exit at a time when company growth is stagnating or declining, making it less appealing in the eyes of buyers
  • You fail to identify and take straightforward steps that could boost your company’s value to buyers
  • You only market your business to a handful of suboptimal buyers, who won’t pay a premium or protect the legacy you have built
  • You exit during a buyer’s market rather than a seller’s market, giving leverage to those looking to acquire your company

These are just a handful of the pitfalls an inexperienced, impatient, or unprepared seller can trip into. Remember: It is never too early to start planning your exit and building a buyer ready business. Even if you have no intention of leaving for several years, laying this groundwork early will put you in a great place to time your exit to perfection, and make this process as efficient and valuable as possible.

That’s what our team at Generational Consulting Group (GCG) specialize in – advising businesses on how they can achieve meaningful, consistent growth, to both enhance their prospects and present a more attractive proposition to buyers later in the journey.

There are two approaches our consultants take to optimize a company’s growth – Strategic Growth Plans and Tactical Acceleration Plans.

Strategic Growth Plans

A Strategic Growth Plan (3 to 5-year strategy) focuses on long-term improvements. This defines the steps to realize your ambitions and gives both your team and potential buyers an extended vision for your company and how you intend to get there.

Tactical Acceleration Plans

A Tactical Acceleration Plan (3 to 12 months) concentrates on short-term improvements to profitability, cashflow and company performance. This approach is best suited to businesses that are underperforming and need immediate tactical guidance.

Both techniques are key to purposeful business growth that lays the foundation for a buyer ready company. Entrepreneurs are purchasing your company’s future, not its past. To maximize the potential value of your exit strategy, it is vital that you can demonstrate your business is growing and how it will continue to thrive once the sale is complete.

If you want to know more about our growth strategies at GCG and the difference it makes to companies ahead of a future departure, I’d urge you to watch some of our client reviews:

Embracing the journey to exit

“Patience is the companion of wisdom” – Saint Augustine.

Enhancing the value of a business and ensuring it is ‘buyer ready’ is often the longest phase of the exit journey. That’s why you should take people’s estimates of ‘5+ years’ to achieve an exit with a pinch of salt. If you lay this groundwork early and continually focus on building your company for an eventual exit, you can save a significant amount of time down the road.

What does this mean? It allows you to time your departure better, and engage with an M&A advisory firm when the market conditions are ideal.  

There are still many steps owners have to take, discussions to have, and hurdles to jump before it’s the optimal time to exit. These can be prolonged in several ways:

  • Is the owner mentally prepared to exit his/her company?
  • Are the company’s financials accurate and documented?
  • Is there a robust management team in place to manage this transition?
  • Have ideal buyers been identified and approached?

From the time it takes to target, engage and attract prospective buyers, to the questions to answer in due diligence, the journey to exit can be a real test of patience. Therefore it is vital to have a trusted, experienced M&A advisor by your side. They’ve walked this journey countless times before and know the best way to navigate it!

Investing in an experienced team supporting your exit strategy helps ensure that the patience needed to fulfill your ambitions is worth it in the end. In addition, having true professionals will enable you to meet all of your milestones:

  • Financials are re-casted
  • Buyer lists are composed
  • Due diligence is handled
  • Negotiations are structured

With an expert team by your side, you can make sure that your business continues to thrive (which is so critical in the months preceding your exit), and that your exit is on schedule. This prevents your departure from being prolonged or mismanaged.

Make sure your patience pays off

While you may be eager to start life after business or disheartened by the estimated amount of time it takes to exit a company, I hope this helps to reassure you that a mixture of patience and planning ahead can make all the difference to your financial future and your company’s legacy.

Whether it is taking the time to grow the value and stability of your business in the years leading up to an exit, or reaching out to a professional experienced M&A advisory firm – the time you spend here will pay dividends when the transaction is complete.

I can assure you that by investing time and resources in profitably growing your company and securing the right guidance today, you are giving yourself the foundation for an optimal exit tomorrow.

If you are interested in learning more about the steps involved in exiting a business, I encourage you to attend a Generational Growth and Exit Planning Executive Conference.

Our educational conferences provide business owners with powerful, strategies to maximize company growth and achieve a successful fulfilling sale. Register now if you’re interested, or you can find more useful information in Generational Group’s regularly updated Insights.

Dr. John Binkley
Chairman & Founder, Generational Group