Selling a business is not simply a matter of finding somebody willing to buy it.
Once serious conversations begin, the company is looked at differently.
Questions become more detailed.
Assumptions are challenged.
Customers are analysed.
Numbers are reconciled.
Dependencies become visible.
And weaknesses that have been manageable for years can suddenly become important.
That is why exit readiness should start before a buyer appears.
Buyers need to understand what they are buying
An owner may understand the company instinctively.
They know:
- which customers are dependable;
- where margin is made;
- which employee solves which problem;
- what the real risks are;
- why next year should be stronger than this year.
A buyer does not have that context.
They need evidence.
The easier the business is to understand, the easier it is to scrutinise.
Six areas worth strengthening early
Financial visibility
Can you produce reliable management information?
Can performance be explained?
Can forecasts be reconciled to what is actually happening?
Unclear numbers create uncertainty.
Quality of earnings
How dependable are current profits?
Are margins sustainable?
Are results distorted by unusual costs or income?
Can management explain what genuinely drives performance?
Cash generation
A buyer may care about more than accounting profit.
They may want to understand:
- working capital;
- debtor exposure;
- customer terms;
- cash requirements;
- how much funding the business needs to operate normally.
Customer concentration
A company heavily dependent on one customer carries a different risk profile from one with more diversified, repeatable revenue.
Know where the dependency sits before somebody else asks.
Owner dependence
Would the business continue to function if you were no longer there?
Can somebody else:
- manage customers;
- approve decisions;
- explain the numbers;
- maintain key relationships;
- lead the team?
A buyer is buying the business.
Not permanent access to the former owner.
Systems, processes and governance
Does the business operate consistently?
Are responsibilities clear?
Are material contracts and records accessible?
Are financial controls proportionate and dependable?
Good infrastructure reduces uncertainty.
Due diligence should not be the first time you look closely
Due diligence becomes particularly uncomfortable when it uncovers issues the owner has never considered.
It is much easier when leadership already knows:
- where the weaknesses are;
- what has been improved;
- and what still needs explaining.
That is why preparation matters.
Do not wait until you have decided to sell
You may improve the business and then choose not to sell.
That is not wasted effort.
A company with:
- stronger reporting;
- better cash visibility;
- lower owner dependence;
- clearer responsibilities;
- more reliable processes;
is generally easier to run while you still own it.
Exit readiness is therefore as much about creating options as completing a transaction.
Know where Julia’s role starts and stops
Preparing the financial and operational foundations is only one part of a business sale.
A transaction may also require specialist:
- legal advice;
- tax planning;
- formal valuation;
- corporate-finance advice;
- transaction support.
Julia’s role is to help make the underlying business more financially visible, better controlled and better prepared before those specialists need to do their jobs.
Where appropriate, Leask can work alongside the owner’s wider adviser team.
Questions to ask now
- Could somebody unfamiliar with the company understand how it makes money?
- Could management explain the forecast without you?
- Where is revenue concentrated?
- What would stop working when you leave?
- Would financial due diligence expose a weakness you already know about?
- What could you improve now while you still have time and control?
Those are useful questions whether exit is close or several years away.
What to do next
A stronger exit starts with a stronger business.
And the earlier you understand what needs attention, the more options you retain.
