What Does An Exit Really Mean?
It’s important for business owners and founders to know that they have options when exiting a business through transition or a sale. This could include selling a controlling interest and retaining a minority stake or vice versa. This could also mean selling 100% of the company.
Working with an investment bank to arrange the sale of your business empowers entrepreneurs to focus on defining their career objectives and financial goals. As a result, the type of sale you pursue should coincide with these priorities. The percentage of the company you ultimately decide to sell will be determined by:
- Roles: Do you want to be involved with the company after the sale? If you are involved after the sale – for how long and in what capacity?
- Liquidity: How much cash is required for your next chapter? How much equity would you like in the new company going forward? Do you even want equity in the new company?
- Decision-Making Power: Do you want to retain influence over future decisions?
- Risk: The percentage of risk may correlate to the percentage of future involvement. How much risk are you willing to take on at this stage of your career
Defining Value To Achieve Financial Goals
When it comes to defining value, many people are aware of fair market value (FMV), however, value defining criteria can also include:
- Growth: If your company has experienced steady, predictable growth, a buyer will pay a premium for your business.
- Recurring Revenue: Recurring contracts and subscriptions often signal financial stability and can provide an instant source of income for a buyer. This also allows the buyer to forecast financials with increased certainty.
- Secret Sauce: Buyers look for differentiators that they could use to drive growth. Companies with a unique offering have intrinsic and synergistic value.
- Customer Concentration: Does a small group of customers make up your revenue?
- Location: Is your business in close proximity to resources or supply chain access, or does it possess natural physical attributes that are difficult to replicate?
- Financials: If your business has clear, clean and consistent financial records, this increases your chance of a higher valuation. This includes accurate and consistent bookkeeping as well as regulatory compliance with governing bodies.
- Satisfied Customers: If your product or offering has a demonstrable and satisfied following, this sets your organization apart from the competition.
- Process to Generate New Clients: Do you have a sales and marketing team?
- Management Team: Is the success driven by a team rather than a single owner?
Rather than starting from the platform of a single transaction type, after REAG guides you through a discovery call, they can suggest transaction types that fit with your overall goals. Then you’ll have a full menu of real-world options to choose from to achieve the transition that makes the most sense for you.
Need help understanding how to figure out your best transition option? Reach out and let’s have a conversation.
