Are you ready to exit Your business?
Would you receive its maximum value if you had to exit your business today? This question is critical for business owners who have spent years building their companies. Your business represents your professional identity and legacy and a significant portion of your wealth. However, when the time comes to transition—whether selling, stepping back, or handing it over—many business owners are surprised to find their businesses valued well below their expectations.
Consider an example: we worked with two co-founders of an electronics company who built their business from the ground up over 20 years. Their company had grown to 50 employees and had earned the trust of their clients and staff alike. However, due to economic challenges caused by Covid, the business started experiencing losses. One founder wanted to retire due to health reasons, and the other was eager to spend more time with his family.
When they began exploring the sale of their business, they were surprised by the valuation they received—significantly lower than they had anticipated. Potential buyers cited three key issues:
Weak leadership succession—the business was overly reliant on the founders.
Ad hoc sales processes—no formal system for customer acquisition or retention.
Inconsistent financial management—the lack of clear, reliable financial data made assessing the company’s long-term performance difficult.
These factors directly impacted the company’s valuation despite the founders’ two decades of hard work. Buyers saw the business as risky because it relied on the founders and lacked structured processes and financial transparency. In essence, these gaps diminished the company’s value in the eyes of potential acquirers.
Valuation and financial impact
Your company’s valuation is not solely based on revenue or client relationships. A buyer will also look closely at how well your business can run without you, how efficiently it operates, and how reliable your financial data is. A company with strong systems, clear financials, and an established leadership team will always command a higher price than one with weak infrastructure, regardless of its sales figures.
If you are thinking of exiting within the next 18-24 months, now is the time to ensure your business is positioned to receive maximum value when the time comes. Here are three key areas to start your plans:
1. Strategic clarity: Do you know your target markets and how your products/propositions uniquely serve your target customers? Is your energy focused on the areas that will deliver the most value, or are there any activities that do not deliver value towards your long-term goals?
2. Growth and execution: Is your business executing its strategy to drive sustainable growth while balancing revenue with profitability? Have you integrated digital technologies into your operations, compliance, and sales processes to improve efficiency and create new ways of working? Embracing digital tools helps scale the business and can lead to the development of intellectual property (IP), increasing its attractiveness to potential buyers.
3. Leadership: Can your business run without you? Have you developed a leadership team that can operate independently and guide the business forward in your absence? A strong leadership team increases the confidence of potential buyers and maximises your company's valuation by reducing dependency on you, the founder.
In Part 2, we’ll dive deeper into how you can take practical steps to address these issues and position your business for a successful exit. Stay tuned for actionable strategies that will help you maximise the value of your business.
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