What steps can you take to prepare your company for the exit process?

If your ambition is to sell to a strategic investor, you should actually start the process a few years ahead by making list of a few most probable buyers and start building relationship with them by: integrating your product with their ecosystem, selling to their clients or distributing through their partners, building personal relationship with key senior level employees, participating in various initiatives that they may have such as accelerators/challenges.

Best businesses are bought, not sold. And the founders typically start preparing 2-3 years in advance ahead of the exit date for their investors. This means making sure that they are out and about -visible to the potential acquirers way ahead of the process and the business performance remains steady ahead of the exit. Valuations and terms then take care of themselves, it's an outcome not a goal.

One reality is that you plan for the exit from the first day you went out to fundraise, but the actual exit is probably a lot different from what you had envisaged and you probably went through several possible exit offers prior to that. As a founder, it is your job to think of the exit because all your investors will ask you and in fact it would also be written in your shareholders agreement. Also, as such as your investors sound like fans of your business, they are all investors at the end of the day looking for a return on their investment, and they will be looking to you the founder to make thst crystallisation event happen - shepherding your company, employees and other shareholdes towards this milestone. Try that+connect with me??

Embarking on the exit journey starts with introspection. Defining clear goals, valuation expectations, and desired deal terms isn’t just about attracting the right buyers—it’s about aligning the future of your company with the visions of those who helped build it. Remember, a well-prepared exit is not just a transaction; it’s a testament to your company’s legacy and its stakeholders’ trust.

Build relationships with potential buyers: Research and identify potential buyers who may be interested in acquiring your company. Establish relationships with these buyers, communicate your company's value proposition, and gauge their interest in a potential acquisition.

Due diligence is a brutal process. Potential acquirers will get all up in your tech and your financials in ways you might not even be able to imagine. Don’t try to hide or be cute with the numbers - both Wall Street and private equity firms will respect transparent, reasonable answers to their questions. Larger companies want to know if it’s cheaper to build or buy your firm to solve their need make a strong case for the full value of your investment into your startup, including intangibles like brand, team and strategic partnerships. Ultimately, it’s a test within itself - are you the type of partner that is smart & trustworthy or are you a shifty game-player? Character does count when it comes to your financial reporting.

Founders want to exit with the most money in their pocket. One of the best ways to do that is to move to a tax-free state and allow themselves to maximize their capital gains. Strategically, one must do this about 13 months before the exit check hits the founder's bank account. Before the exit check comes, though, doing an audit of your books for surprises is best before an investor finds something to devalue the offer. Then, focus on CLV, profitability, problems hindering sales and user happiness.

Fine-tuning your financial narrative is crucial. It’s about more than just numbers; it’s about weaving a story of stability, growth, and future potential that resonates with acquirers or investors. Transparent, detailed financials and projections don’t just reflect your company’s past performance—they shine a light on its scalability and sustainability, laying down a path of trust and confidence for a successful acquisition or investment.

When preparing your financial forecast, make sure that your assumptions are as close as possible to your operations. Ideally, they are based on KPIs that you have tracked for multiple years and can therefore back their future development by historical data. Same goes for the development of cost. The better you have tracked your historical unit economics, the easier to credibly forecast their future potential.

Operational excellence is not just a prerequisite but a value amplifier in the exit process. Ensuring your offerings exceed market standards and customer expectations sets the stage for a compelling value proposition. Streamlining processes, standardizing best practices, and mitigating legal and regulatory risks not only enhance operational efficiency but also fortify your company’s standing in the eyes of potential acquirers or investors. It’s about presenting a business that’s not just running smoothly but is poised for seamless transition and future growth.

Optimisation of operations implies checking that there are no shortfalls in the processes. It includes automating processes that have been manual. It also includes outsourcing activities are core to the business

I agree that a strong team is important to most buyers, but adding people just prior to an exit does not seem prudent in most cases. Considering hires as investments, it’s rare that companies can achieve ROI on new hires within typical exit windows. Instead, focus on retention for your best and core folks, trimming if you must, and showing consistency to buyers, who typically don’t like to see big moves made just prior to an acquisition.

To ensure that skill gaps are identified, one must begin by documenting all the jobs performed within the company or small business. An organogram is a good place to start. This will highlight the gaps and then, using your network, seek competent personnel

It's my practice to uphold the promises I made to my team throughout the journey, both as the CEO and a human being. This includes the "not-so-little" things like meeting for a walk or coffee. In doing so I train myself to deliver on my word to build trust amongst my team, and continued trust in myself. Remember, our team’s success during an exit isn’t solely about financial gains; it’s about leaving a legacy of trust, growth, and resilience. By honoring our promises and fostering a supportive environment, we pave the way for a successful transition.

Most investors and potential acquirers like to see that you have not only a solid senior team with diverse skillsets and specific expertise. They also often look to see who your advisors are and who is on your board. That's for 2 reasons. First, it shows you know there are things you don't know & you've recruited those with superior experience for counsel. Secondly, your board of directors are the folks who will help you make decisions along the way, including when it comes to exit strategy. Finally, your team at the top matters as much as the middle & bottom. Studies show that diverse led teams are more innovative, productive, profitable & exit at higher multiples. Be savvy and don't create a monoculture that's likely to be less effective.

A smart buyer will offer ways to further incentivize the key people of the company. However, make sure that expectations are clear way before that. If a key employee wants to leave the firm after the process, make sure to keep him out of the process as much as possible and build up a successor early. The situation might be different from buyer to buyer. People might want to continue in case your company is bought by a private equity firm versus a strategic buyer. All potential scenarios should be transparently discussed within the core team far ahead of the process.

I wouldn't have been able to launch my startups without my relationships and I definitely wouldn't have been able to sustain them and then sell those companies without my relationships. In today's world, it's easier than ever to maintain so-called "weak ties". I've found those can be stronger than you think! Connections can be pivotal when it comes to word of mouth. Make sure you are engaging online and offline to highlight successes and to ask for support during challenges within your network. You want to create a community around you that is likely to say good things. At the top, the degrees of separation get smaller. Assume that buyers & partners will check in with each other to compare notes & experiences about you and your firm.

Be honest to yourself. Do you really have the network to identify and approach the best possible buyer? In many cases, this means a truly global approach of 100+ parties, often both financial and strategic. There is a high likelihood that the best possible parter (and potentially the one that pays the highest price) is not yet in your network. Your current investors can potentially help. Investment banks can help. Make sure you validate all options.

Having a management team that can transition after the owner exits is a strong plus for most buyers. And tight books says alot about a company! As an advisor... We agree. Using an M&A advisor makes for a smooth process, increases the value through multiple offers, and allows the owner to also keep running their business during a transaction. They can be intense and take some time.

There are only 3 roads to exit: 1. Private trade or wash sale of the company to a competitor or a fund. 2. Merger with a public company or a shell (generally a bad solution of exit) 3. The royal exit, the Initial Public Offering. All solutions require quality: a. audited financial statements b. complete data room enabling high-quality due diligence c. disclosure material d. budget & financial projections e. marketing plan with smart strategy

1. Make sure your sales are growing and your accounting is air tight. 2. Address any loose-cannon HR issues 3. Hire the right advisor

A potential exit involves careful planning and execution to maximize value: -Understand your options: Various exit strategies such as IPO, acquisition or merger. -Financial preparation: Records should be accurate & well organized. -Legal preparation: Ensure IP rights are secured, no disputes and legal documentation clean. -Management: Experienced team capable of leading through exit process. -Customers & growth potential: Provide detailed info regarding customer base and scalability of business model. -Advisors: Engage professionals (IB, consultants) to maximize value. -Exit plan: Develop strategy & key milestones. -Confidentiality: Keep it confidential to avoid disrupting business. -Position of strength: Display unique value proposition.

Make sure all legal items are resolved well before pursuing an exit. In my experience, even small legal issues make it very easy for buyers to either say no or bake in significant discounts.