Before You Begin – Select your Exit Advisor
Your exit advisor will help you identify goals and work through the process to achieve your goals. It is really important that the exit advisor be someone you trust and that he/she is able to work collaboratively with your existing advisors, the management team (when the time comes) and new team members brought in for the project. The exit advisor is the “Quarterback” who will get the project started and drive it to completion.
First Step – Market Value
The first step in the process is determining what the range of market value is for the business. This is accomplished via a valuation through assessment of the business. An estimate of market value will include those factors that are tied to the business and financial aspects of the business.
Having a good understanding of the value of your business that includes an analysis of the factors that tend to improve value will be useful in strategic planning as well. For example, if the company anticipates growing significantly over the next two-to-three-year timeframe, it may be time to include initiatives to support that growth.
Second Step – Prepare and review options
In some cases, the valuation may seem reasonable, but when the owner consults with his CPA to determine what his/her after-tax result would be, there may be an unhappy surprise if it is lower than anticipated. In these cases, the solution may be a tax minimization strategy, a business value creation strategy or both. Having the proper tax, legal and accounting advisors on the team while working with a business advisor will provide the owner with the best outcome.
This is also the time when the business owner and advisor will determine if there are any gaps in the business that could/should be filled. For example: Is the leadership team solid for the potential exit strategy to be executed? What kind of capital investments might be made for a business optimization strategy including IT and/or equipment?
This phase of the exit plan may take months or extend for years to accomplish the desired outcome. In a perfect world, the optimal value can be reached while market conditions are favorable for the business and for the potential buyers. (Now is a good time with investors seeking landscaping businesses with recurring revenues for sale, interest rates low, capital gains rates low (for now) and the landscape industry market robust.
Third Step – Choose an Exit Path
Once the owner has the information he needs and selects his desired exit path, the advisor will manage the plan and begin to execute the project through collaboration with others who might include private equity groups, strategic buyers, ESOP advisors, or others.
Having an exit plan is key to achieving your long-term goals for yourself and your company. Our goal is to help you maximize your company’s value. If you’d like to discuss your company’s readiness for sale, buying a company, help with an existing acquisition or sell your company, please let us know. In the meantime, if you have questions or comments, I can be reached anytime via email: [email protected] or phone at: 224-688-8838. We’re here to help you Harvest Your Potential.