Exiting a business is often seen as the final step in an entrepreneurial journey, a conclusion to years of hard work. However, a truly successful exit begins long before the actual sale or exit takes place. In my experience, on both sides of the table, I have seen how early and proactive planning can make a dramatic difference in the ultimate value of a business at the point of sale.
Business owners should start preparing well in advance to fully realise the opportunities, strengths and capabilities they need to achieve the highest level of success in an exit.
The Value of a Roadmap to Exit
When deciding to go to market, business owners are often engaging with buyer expectations for the first time. This includes understanding what drives value, what increases risk, and the different factors that will influence a successful deal. By starting the exit planning process earlier, entrepreneurs can align their growth strategies with market realities. This roadmap not only ensures smoother transitions but also allows owners to calibrate their strategies with what the market is actively looking for, rather than relying on theoretical projections. In doing so, we can avoid late-stage surprises that could impact value.
Why Early Planning Sets a Business Apart
Many business owners assume they can only start planning for an exit when they are ready to sell. However, early planning allows owners to bridge the gap between business development and market expectations. Unlike incubators and business coaches who focus on growth, at Deal Leaders International, we focus on real-world M&A experience, local and global market intelligence, and daily interactions with potential buyers. This insight provides a deep understanding of the exact criteria buyers use to evaluate potential acquisitions in different industries.
One of the biggest misconceptions I encounter is the belief that dressing up a business at the last minute can cover up operational gaps. While enhancing the appearance of your business may help, it is the fundamental metrics — cash flow, governance, compliance and auditability — that buyers will scrutinise. Identifying and addressing these elements ahead of time avoids costly adjustments later on and creates a more compelling, genuine value proposition for buyers.
Core Elements That Drive Pre-Sale Value
To maximise the value of a business, owners should consider a few critical elements that almost every buyer will examine:
Growth and Financial Stability: Buyers seek businesses that show consistent growth, not just sudden performance spikes prior to sale. Proving your ability to forecast accurately and meet budgets is essential.
Cash Flow and Balance Sheet: Working capital cycles, cash generation, debt levels and balance sheet structure can greatly influence a buyer’s perception of risk and value.
Governance and Compliance: A solid audit trail and transparent compliance practices enhance buyer confidence, especially in due diligence.
Human Capital and Succession: Succession planning and the quality of your management team are crucial, particularly for founder-led businesses.
Market Competitiveness: Cash conversion rates, customer concentration risk and operational efficiency relative to competitors all play a role in how a business is valued.
These factors are not about perfection but about meeting key buyer requirements. A business does not have to be flawless to attract premium offers, but overlooking core fundamentals can lead to value discounts.
Timing and Emotional Readiness
One of the hardest decisions a business owner faces is deciding when to sell. Many individuals aim to sell when they feel their business is at its peak. However, timing the sale perfectly is rarely feasible, especially when market conditions and business performance are in constant flux. The best exits often occur when the owner leaves room for future growth, which can entice buyers and enhance the price.
Exiting a business typically takes three to five years. For those looking to sell within that timeframe, the planning process should start immediately. A long-term view provides flexibility to adapt to changes, whether in the business or the broader economy.
Finding the Right Market Conditions
The right time to sell is not solely dependent on economic conditions. While a stable economy is beneficial, the internal health of a business and industry standing ultimately determine its attractiveness to buyers. For instance, while South Africa’s recent governmental and economic reforms might improve business sentiment, buyers will still prioritise your industry’s prospects and the fundamentals of your business.
Preparing for the Journey Ahead
Early exit planning offers significant advantages, but it also requires a mature mindset. Business owners must be prepared to face the shortcomings of the business, which can often be a challenging process. As advisors, our role at Deal Leaders International is to guide business owners through their journey, providing the insight and strategies they need to build lasting value.
The best exits are not just transactional; they are transformational, allowing business owners to reap the rewards of a well-structured journey. By starting early and developing a roadmap grounded in market realities, entrepreneurs can ensure a rewarding and successful exit on their terms.
About Deal Leaders International
Deal Leaders International is a professional, exclusively sell-side advisory firm, helping business owners achieve their growth or exit strategies.
As part of an extensive global M&A network, we have unparalleled access to a pool of high-net-worth acquirers and strategic partners. With a proven track record of high success rates, we have assisted numerous businesses in achieving their objectives, resulting in optimal outcomes for our clients.
We typically recommend companies with an annual profit of R15m+ (up to R300m) to attract good acquirers. However, we welcome businesses of all sizes as we can assist in developing a roadmap to saleability.
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