What are the best practices for managing financials during a company exit?

Inventors, visionaries, and founders should convey passion energy, and "use frame control" when talking about their products and company. Stay focused and on point "frame control" Be on railroad tracks with one topic success. For most founders this is easy. What is difficult is knowing the financial side of things. I find gaining interest in the story is easy with enough touch points. However, it is the math that makes the company. Understanding of your expenses, burn rate, runway, run rate, historical, and forecasted. Know these answers and reply with the same passion and enthusiasm. Gatekeepers of the money with tear into your numbers way before they "look" at your story. Financials are your pulmonary system!

It must be decided which party receives first priority to purchase the shares. If the company has priority, then the investors have "secondary refusal rights" to buy the shares if the company passes.

In preparing to exit a business, it's crucial to concentrate on People, Processes, and Performance. This means ensuring that everyone, from front-line staff to leadership, understands and shares the company's vision. Clear communication and alignment are vital. Establishing efficient processes guarantees that the business can operate smoothly even during changes. Regularly measuring key performance indicators (KPIs) ensures that the company stays on track with its vision, helping to gauge success and identify areas for improvement. This approach helps maintain momentum and drive toward the desired outcome during the exit process.

Leadership, management, operational excellence, brand and integrity are the thing that builds the thing - i.e. value. Cashflow is the measure of efficacy of deployment of your capital decisions. Knowing that you have made sufficient bets on projects with enough time to see them pay off and being able to demonstrate your ‘miss’ percentage on targets being achieved is lowering to the point of real trust makes a forecast a believable story. It’s worth doing this for yourself and invaluable to your sale process.

Allow investors who choose to exercise the ROFR to purchase not only their pro rata allocation, but also any shares that other investors decline. This is called a "right of oversubscription."

Set an expiration date for when the ROFR terminates, such as after a certain time period, upon a liquidity event, or after the ROFR holder passes on an offer the first time.

Specify that revisions to the ROFR terms are only allowed if they are "not material" to preserve the original intent. This prevents excessive modifications.

Sometimes founders get in the way of their success. The perception of your value has many prongs. To me, the ability to build a team of outstanding individuals reflects leadership. Do less and empower others to shine and do more. I subscribe to the "Theory of Constraints" to make a perceived weakness a strength. Increase the throughput with a wider bottleneck. Convey that this is done because you willingly gave responsibilities to teammates who are better at it than you. Be the mission-driven face of the company and allow others to shine.

Read the book "Pitch Anything" by Oren Klaff. Yes the golden rule is to always take the money. However, the terms and the sources might cost you your company. Understand the math of your company (your company's pulmonary system). The wrong deal WILL cause a trigger event and exacerbation of your financials. A death spiral (convertibles) might slowly drain your "free cash flow" Know your dance partner and make sure they do not step on your toes. Never take enough rope to hang yourself with. Keep both eyes on your debt. Good money should never be given to bad. Stick to your terms and find those that share your insights.

Assuming you dealing with a rational, intelligent and ethical person is the first mistake. Get to know the buyer, build trust before committing. Be honest about deal tension and alternatives. Finally, keep the documents as simple as possible. If you have to reach for the documents after the deal is done, you are in trouble. Never ignore red flags. Keep going, there are great buyers out there for good businesses.

(a) Implementing tax optimization strategies can significantly impact the net proceeds from the exit. For a clean tech startup's acquisition, we worked closely with tax advisors to structure the deal in a tax-efficient manner, considering aspects like capital gains tax, rollover relief & the implications of deal structuring on tax liabilities, maximizing the financial outcome for shareholders (b) Effective management of working capital leading up to & during the exit process ensures the company remains financially healthy & attractive to buyers or investors. In the lead-up to a logistics company's merger, we focused on optimizing inventory levels, receivables & payables, thereby presenting a financially stable entity during negotiations.