It is a given that we will all exit our business at some point - willingly or not! - and it is never to soon to start planning that exit. There is a link at the end of this deck to the associated blog and webinar recording

1. It is a given that we will all exit our business
at some point - willingly or not! - and it is
never to soon to start planning that exit.
There is a link at the end of this deck to
the associated blog and webinar
recording

2. Exit Strategy Planning
How to Value & Sell your Business – Andrew Heslop
Exit Strategy a practical guide to selling your business – Graham Watkins
Built to Sell – John Warrillow

3. Objectives
To help guide business owners in developing a
suitable exit strategy. We will:
• Consider reasons why we need an exit plan and
when we should make one
• Explore ideas to help identify potential purchasers
• Look at alternative ways of exiting
• Review ways to assess value
• Suggest ways to maximise the sale price
• Outline the planning and management of the sale
process

4. Why have an exit plan?
• Protection
• Helps drive greater success
• May help you stay on longer
• May help you to release maximum value from your
business

5. Why leave?
“In the long run we are all dead” John Maynard Keynes
• Retirement
• Desire to hand over control – e.g. to children
• Cashing in
• Time for something different/ boredom
• Change in personal circumstances
• Ill health
• Divorce etc.
• Outside opportunity
• Outside threat

6. When should you start planning?

7. Timing is important….

9. Alternatives for Exit
• Flotation – suitable for less than 1% and costs
£350k plus
• Trade Sale
• Management Buy Out – MBO.
• Management Buy In – MBI
• Hybrid Buy In – BIMBO
• Acquisition by another company
• Asset Sale - Voluntary or Compulsory Liquidation
• Walk away

10. Trade Sale – who will buy your
business?
• Competitors
• Suppliers
• Customers
• Employees
• Private Equity Firms
• Business Angels (national business Angels
organisation)

11. Activity: Make some lists!
Competitors
• Who are they?
• Why would they be
interested?
Suppliers/ partners
• Who are they?
• Why would they be
interested?
Customers
• Who are the key
customers?
• Why would they be
interested?

12. How much?!
• “…the price someone is prepared to pay for it in the
open market”
oIt is not just about the financial performance
• A valuation is an opinion – nothing more
• There are not two certainties in life but three.
‘Death, taxes and the valuation is wrong’

13. Why would someone pay more
than the financial valuation?
• Synergies
• Sell more
• Charge more
• Spend less
• Immediately revalue at higher multiple

14. Activity: Look for synergies
• Consider from an outsider’s perspective
• What opportunities to sell more, charge more or
spend less?
• E.g. would a larger business be able to bid for larger
contracts?
• Would they be able to strip out a layer of cost?
• Would it give them access to new markets more cheaply
than they could on their own? Etc.

15. Methods
• 4 Key methods
• Net Asset Value – not normally used for a thriving business
• Comparables - private sales and/ or p/e ratios of publicly
listed
• Multiples– multiples typically of pre-tax profit)
• Public companies approx. 15 x profits/ earnings
• Private companies approx. 4-5 x profits
• Net present value – discounted cash flow
Also
• Cost of entry
• Sector rules of thumb – e.g. 1 x Gross Recurring Fees
(Accountancies)

16. Previous webinar
Smart Room - biz-
smart.co.uk/smart-
room/

17. There are eight key drivers to your company’s value:
•Financial Performance
•Growth Potential
•The Switzerland structure
•Valuation See-Saw
•Recurring Revenue
•Monopoly Control
•Customer Satisfaction
•Hub & Spoke

18. Get Your Value Builder Rating
• Based on over 15,000 businesses
• Email kevin@biz-smart.co.uk

19. What are your objectives for exit?
• Aspiration for sale price
• Timescale
• Target market of potential buyers
• Practical ideas for maximising the value
• How you will manage the exit process

20. Activity: Creating your investment
story (2 minute version!)
• How does your business generate happy customers?
• Why are they happy to pay you?
• Why will this continue in the future?
• Why will you achieve this despite the efforts of
competitors?
• What is unique about your approach?
• Do the financials support this?
• Turnover?
• Profits?
• Costs?

21. Managing your exit process – only
4 basic ways
1. Sell all the shares and leave
• How and when will you be paid?
• How would a prospective purchase view your departure?
2. Sell all your shares and continue to work in the
business
• Lock in – 1-3 years?
• Targets
• Boss!
3. Sell some of your shares and leave
• Protect your interests – minority or majority ownership?
• Control?
4. Sell some of your shares and continue to work in the
business

22. Different types of money
1. Cash now
2. Deferred payment
1. Linked to future performance (if you have exited then
no control)
2. Lack of capital (e.g. MBO) – usually comes from profits
- take advice!
3. Exchange of shares
1. How do you get your money out? Great if publicly
traded, not if private

23. A note on taxation – take up to
date advice and early!
• Capital Gains Tax
• Taper relief for qualifying businesses – make sure you
qualify
• Inheritance Tax
• Children, staff

24. When should you tell others?
• Staff
• Suppliers
• Bank Manager
Do not tell anyone until you have thought through
the implications

25. A note on Intermediaries
“If you think hiring a professional is expensive, try
hiring an amateur!” Red Adair
• Broker - Commission between 2-5% of sale value
• Lawyer – Hourly rate or Fixed fee (?£20-30K)
• Accountant?
• Wealth manager/ planner

26. Role of a Broker– to manage a
competitive bid process
• Stage 1 – Prepare sale particulars. Identify potential
acquirers, circulate and follow-up
• Stage 2 – issue confidentiality letters to interested parties.
Prepare detailed business profile
• Stage 3 – Conduct negotiations and agree indicative offers
• Stage 4 – Provide assistance to seller during due diligence
• Stage 5 – Give detailed advice on purchase and sale
agreements. Liaise with legal advisors. Advise on
warranties and terms and conditions. Drive the deal.
• Stage 6 – Attend completion meeting.
Commission between 2-5% of sale value

27. Role of the corporate lawyer –
ensure no nasty surprises!
• Prepares the legal documents – confidentiality
letter, share sale etc etc
• Advises on implications
• Liaises with purchaser’s lawyers
• Negotiates final draft
• Attends completion meeting, completes legal
requirements of transaction and collects the
money!

28. Chose carefully
• Interview them – as you would a prospective employee
• Make a checklist
• Ask for examples/ evidence
• References
• Conflicts of interest – e.g. agent who approaches you with a
buyer
• They act for you – you must have confidence you can control
them!
• Consider different sources
• Accountants
• Chamber of Commerce/ FSB
• Trusted individuals/ networks
• Contacts who have sold out

29. Activity: Preparing your own exit
strategy
• Objectives and aspirations
• Current Valuation
• Opportunities for increasing the valuation
• Barriers to sale/ indirect limiting factors
• Sale process
• Tax Planning

30. BizSmart help business owners of small and medium sized
businesses to create value and scale their businesses through
sound practical business support by providing insight, Clarity
combined with a real determination to help you succeed.
You can access webinars and presentations like this and more
besides through our SmartRoom service here
You can read the associated blog and listen to a live recording of this
presentation by clicking here
You can read Kevin’s profile here

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