Step 1: Preparing your board
The sale of a business is often the most important ‘transaction’ a business owner will make in their lifetime. Preparation and pre-sale planning can influence the outcome of an exercise and thus, it should never be underestimated.
This summer, Bluebox will publish its ‘5 steps to a successful sale and what you can do in your role as a Non-Executive Director to help your board’. Here is our first step.
When preparing for a sale process it is important to carry out a full review of the business. Some critical and objective questions should also be asked to the board, for example:
· Does the business have any loss-making products or services, which are not adding any value?
· Does the business have any USPs, which are not fulfilling their maximum potential?
A buyer wants to see a business with lots of potential and a roadmap for its growth. Following an initial review, the board should draw up a new business plan which fully articulates this.
While always difficult to control, determining an exit timeline up front can help to structure the sale process and mitigate the potential impact on trading. Having a plan will also provide sufficient time to address any significant knowledge gaps in relation to the sale process itself. This may include particulars which often require specialist advice such as personal and corporate tax planning. Advising your board to address these gaps early on will help ensure that both the business and its shareholders can be positioned appropriately for exit.
The nature of any sale process is such that there will be a requirement for a wide range of information to be ready at hand. Early preparation and organisation of these key documents can significantly help to smooth the process and reduce the time taken to completion. All documents should be stored together in a confidential and online storage facility. An online facility will allow the potential investor/buyer to access documents at any time during the due diligence process without detracting the board from their day to day business activities.
One of the best pieces of advice you can give to your board when they are thinking about future exit strategies is to appoint an adviser early on. Doing so one to three years in advance of a sale will allow you to both identify and address issues that could possibly compromise any deal at the point of exit if left unaddressed.
Look out for steps 2, 3, 4 and 5 coming soon...