Prepare watertight plans before taking an exit route

2. Think about your objectives and explore all of the options available to you. Make sure you gain a good understanding of the market and its appetite for your business. This will enable you to have realistic expectations.

3. Finding the right exit route is key and you should work with your advisers to identify the most suitable exit strategy. All of the routes, from a trade sale, a sale to the management team or an equity release, need to be explored.

4. Once the exit strategy has been agreed, owners can seek to maximise their shareholder value covering off things which will be important to a purchaser. For example, by securing long-term contracts with customers or suppliers; tying in key employees; demonstrating the business’ growth opportunities. Balance sheet improvements should also be sought, for example, by identifying surplus assets or releasing cash tied up in unnecessarily high working capital.

5. Make sure you establish a realistic valuation for your business. As well as hard financial information such as sustainable underlying profits, forecasts and the net asset position, potential buyers will also want to assess factors such as market position, reputation and track record. A review of recent comparable deals can offer an indication of how much your business may be worth.

6. Identify and evaluate the potential purchasers. These may be international as well as UK based, even for small businesses. Think carefully about why a purchaser would want your business.

7. Selling a company is often the sole opportunity for the shareholders of SMEs to realise their investment and taxation is often an area of value leakage. It is, therefore, essential that you consider ways of minimising any tax leakage as a result of an exit.

8. The drafting of the information memorandum is also key as it is this document which has to create the desired impact on the buyer with a clear and compelling message about the strength of the business.

9. Effective negotiation should not be underestimated if a transaction is to reach a successful conclusion, all parties must ‘buy in’ to the deal and feel their views have been recognised. Only if there is mutual trust will it be possible to work through the issues.

10. Try to be objective. While many owners managers feel passionately about their business, a certain amount of objectivity is needed in order to appreciate the buyer’s viewpoint and find compromises mutually acceptable.