Building Your Business Exit Strategy: The Fact-Finding Mission

Based on insights from the ‘Exit Like a Boss Podcast – 21-Step Challenge‘, this blog covers Step 3 – Fact Find.

Here, we’re delving into a vital aspect of crafting a solid business exit strategy: the fact-finding mission. Getting to the core of your business operations is the initial stride toward comprehending its actual value and the avenues for expansion. Let’s navigate through the pivotal components you must proficiently handle to set the stage for a successful exit.

Understanding Ownership: A Fundamental Step

First and foremost, let’s tackle ownership. Your business may have evolved from a simple, singular entity to a complex structure involving various entities, assets, and stakeholders. Understanding the ownership landscape is fundamental, not just for today, but also for the future, especially as you plan for your eventual exit. Consider scenarios where you might sell the business but retain property assets. Each ownership facet has its implications for asset protection and tax considerations.

Analyzing Financial and Non-Financial Performance

Next up is financial performance. This area encompasses more than just the balance sheets. Analyzing your profit and loss statements is vital, but it’s equally crucial to adjust for any non-recurring or private expenses.

Benchmarking your financials against industry averages will provide insights into where your business stands in comparison to competitors, influencing potential buyers, investors, or lenders.

Beyond the financials, delve into the non-financial aspects, an area often overlooked. A comprehensive analysis, akin to our Business Insights Report, involves scrutinizing approximately 300 non-financial factors. These factors tie directly to risk and valuation. Reducing risk elevates your business value, and many of these aspects contribute to mitigating risk. This deep dive helps you identify areas for improvement, potentially increasing the attractiveness of your business to potential buyers.

Gauging Business Valuation: A Key Determinant

Lastly, let’s talk about valuation. Accurately gauging your business’s current worth is paramount. It’s common for business owners to either undervalue or overvalue their enterprises. Understanding your present valuation equips you to chart a course to reach your desired valuation, whether through financial improvements or risk reduction. This may involve a process spanning several months or even years, so starting early is key.

Taking Action: The Road to a Successful Exit

The actionable takeaway here is to gather all the pertinent facts and figures. When you decide to sell, potential buyers will demand a host of documentation for due diligence. Anticipate their needs and prepare accordingly. Complete a comprehensive fact find today, ensuring you have all the critical information readily available for the valuation analysis when the time comes.

Incorporating these practices into your business strategy not only prepares you for a successful exit but also streamlines your business operations and boosts profitability. Stay ahead of the curve by arming yourself with knowledge, making your business a more appealing prospect and securing a prosperous future beyond the exit.

This article was originally published on capitaliz.com.

Dr Craig West

Founder & Chairman | Succession Plus

Dr Craig West is a strategic accountant who has over 20 years of experience advising business owners.

With a background as an accountant in practice and two master’s degrees, Craig formed a strong view that the majority of business owners (and often their advisers) were unprepared and unaware of the steps required to prepare for exit. He then designed and documented a unique 21-Step Business Succession and Exit Planning process to assist owners and their advisers in navigating this process.

Craig now acts as a strategic business and financial mentor for mid-market business owners. Craig has written four critically acclaimed books educating business owners on employee incentives, succession planning, asset protection, and exit strategies. Additionally, he has completed doctoral research on Employee Share Ownership Plans (ESOPs) for succession.

Craig is a Member of the Forbes Business Council where he leverages his extensive experience to contribute valuable insights on helping business leaders navigate the complexities of growing and exiting their businesses.

In April 2024, the Exit Planning Institute admitted Craig to the International Exit Planning Circle of Excellence.