How to Sell Your Company for Maximum Value
Preparing for Exit
In the years you spend focused on building a business and making it more and more profitable, the process of selling your company isn’t top of mind. But when the day comes to start thinking about your exit strategy — whether it’s because you are ready to retire, the business is facing financial troubles, or you’re hoping to see big profits with a sale — you’ll quickly realize the work is far from straightforward or simple.
Preparing a business for exit can be a long and complicated process, and one that requires a whole new set of skills. You generally need to start working on an exit strategy a few years in advance of selling. Not only do you need to keep your business running effectively, but to get a good price you also want to work to increase the market value of your company before the sale date and during diligence and closing.
That’s a lot to take on. Most owners and executive teams do not have the skills necessary to plan and manage an exit successfully. And trying to add a whole new set of responsibilities on top of their current ones is usually a recipe for failure — especially while you’re trying to increase the value of your business and profitability for the sake of a better sale.
The solution more and more is to take on an interim CFO, temporary head of corporate development, or even a project-based Interim President skilled in M&A who can work alongside the owner.
Interim CFO Case Study:
After a failed sales process of a SaaS company, a $5B private equity fund decided they needed outside leadership. InterimExecs brought on board an Interim Executive Chairman to serve alongside the CEO and management team while making operational improvements, increasing accountability, and ultimately growing the business to point of sale.
Preparing for Exit with an Interim Executive
Interim executives parachute in for a short term to take on a vital project that could be beyond the regular skill set of the owners and day-to-day management team. For a company wanting to sell, you can hire an interim CFO who specializes in creating and executing the business exit strategy and playbook. They’ll work with you for the length of time needed to get your business ready for sale, handle negotiations with interested buyers, and make sure the process runs smoothly from start to finish – knowing that many transactions can start with high hopes but derail if not carefully managed.
When preparing for exit, an interim CFO expert in M&A brings:
- Vast experience, having already helped other companies through the same sales process
- The specific set of skills required to assess the current state of your business, prepare a realistic exit strategy, and lead execution on the plan
- A fresh set of outside eyes to help you see your company the way potential buyers will and create an action plan to maximize the value of your business
- Expertise for instilling confidence in prospective buyers and managing a smooth sales process
Creating a business exit strategy is not business as usual. No matter how skilled your current company leaders are you probably don’t have the right talent and experience within your company to do the best job at going through a sales process on your own. An interim CFO or temporary head of corporate development takes on the work they’re good at, empowering the rest of your team to keep focusing on doing their jobs as the company prepares to show itself off in a new way.
Selling your company has become incredibly complicated – the process of selling, diligence, documentation, and closing is fraught with land mines everywhere you look or move. Smart owners know better than to risk everything they’ve so carefully built over the years – they rely on outside expert resources to make sure everything goes well from start to finish.
Robert Jordan, CEO, InterimExecs
An Interim CFO’s Process for Selling a Business
An interim CFO or Head of Corporate Development knows the detailed playbook to guide you through the full process of preparing for exit and completing the sale of your company. That includes providing leadership during various stages of the exit process.
- Determine your exit strategy goals.
To develop the right plan for your business and needs, the interim executive brainstorms with owners and investors to align on the biggest goals including target sales price of your company.
Is your company doing well and you’re selling to achieve a big payday? Or is your company underperforming and in need of an exit strategy focused on merger or a longer term earnout? Are you happy to sell and ride off into the sunset, or do you want to still have some level of involvement with the business? Is it important to you that your employees continue with the company or that aspects of the company’s legacy are preserved?
If you’re not sure about your goals, an interim CFO will know the right questions to ask to help you gain clarity in what you really want to accomplish.
- Assess types of potential buyers
Looking at a world of potential acquirers from financial buyers to strategic buyers may be overwhelming, but owners should be sure that no stone is left unturned.
Financial buyers like private equity funds or investors will be looking for a company that has the potential for future growth or where operational efficiencies can increase their bottom line or add to an existing platform investment. Many company owners may not get the valuation they want because they have not put necessary processes or financial systems in place. An Interim CEO or Interim CFO can help while leading negotiations with investors, ensuring your best interests are represented.
Strategic buyers – often companies already in or looking to expand into your industry – have reasons beyond your company’s profitability. These established companies in your space may look to reduce the number of competitors, get a hold of your client list and product details, or add your product offerings to their business.
An interim CFO or Interim Head of Corporate Development will help you understand your options and make an analysis of which type of buyer to prioritize based on your goals and situation.
- Maximizing the value of your company.
Part of running a business is learning how to successfully sell a product. When you’re preparing for exit, your business becomes the product. That can be a hard mental shift for a company’s owner and executive team to make.
An interim CFO knows how to assess and enhance all the valuable parts of your business to better understand where its value lies to an outside buyer. They can identify your top strengths and assets, whether that’s your employees, customer list, intellectual property, current branding and marketing strategies, business processes, or something else completely.
They’ll review your financials to make sure there are no underlying problems, but more often than not, there may be issues that need to be addressed prior to the sale. And they’ll consider what the company’s opportunities for future growth look like. All of that will help in evaluating what your company looks like as a product, so you’re able to start positioning it for highest return.
- Create a plan for preparing for exit.
A strong business exit strategy will include a plan to maximize the value of the company in sales before you start looking for a buyer. In the analysis phase, an interim CFO or interim executive expert in mergers and acquisitions will identify opportunities to increase profits by some combination of cutting costs, increasing sales, or raising prices. They’ll outline specific steps to help you reach a point where your revenue is higher and you’ll be more valuable to buyers.
And they’ll outline steps for getting the company ready for the big changes that come with a sale. That means thinking about how employees may be affected and how to communicate the situation to them. And it includes thinking about the influence on customers as well, and how to make sure they’ll want to stick around. For some types of businesses, it may include encouraging long-term agreements with employees and/or clients to provide reassurance to potential buyers that the company’s assets will stay in place after the sale.
- Executing the plan.
One of the big ways interim executives differ from consultants is that they don’t stop at performing an analysis and drawing up a plan. Talk is cheap, action is dear. They stay to lead, to be held accountable for results. An interim CFO will determine the best way to execute on each step they’ve recommended. They’ll be there to see if one of the strategies suggested doesn’t play out as intended, and make updates in real time.
They’ll establish key performance indicators (KPIs) to measure progress and set clear goals. They’ll help you benchmark success in a way that makes it demonstrable to buyers. And they’ll help owners and boards recognize the moment when your business is ready for prime time.
By this point, they’ll have helped position the company for best effect.
They’ll develop a pro forma that provides a realistic estimate for buyers of what the company’s future profits will look like if they follow suggested strategies. They’ll highlight the most valuable assets your company has now. And they’ll determine how best to tailor the message to the particular needs of the buyer.
- Finding the Buyers and Working with Your Investment Banker
An interim CFO will help lead the process of identifying potential buyers who are both likely to be interested in your company and match your exit strategy goals. This is never their first rodeo – for them to have already earned their spurs, even if they don’t know your industry, they know how to assess likely and appropriate buyers and evaluate the relative fit to each of your needs. If the company has also retained an investment banker, they’ll coordinate the investment banker’s work with the owner and board of directors.
- Manage and close the transaction.
An interim CFO also has skills to help you negotiate the best deal possible for your company. If multiple interested parties are bidding, your interim CFO or interim executive will help the board or investment banker to manage the bids to determine and secure the best buyer for the company. At this point, a cascade of documentation is triggered, from a term sheet, which could be binding or non-binding, to complex schedules of closing documents, due diligence, and transaction timing. The coordination of this process has become highly complex, meticulous and specialized. At no other point in the sale process is it more apparent how valuable outside leadership has become to make sure everything goes well and nothing derails a good result.
- Create a succession plan for after the handoff.
You want to set up the buyer for success after the sale. The interim CFO helps with that as well. If part of their assignment, they’ll put an integration plan in place that considers your company’s current processes, your buyer’s needs, and how best to combine the two for long-term success.
For all the work that goes into preparation and the sale itself, many mergers and acquisitions fail after the sale is completed. A good post-sale strategy developed by someone with an extensive understanding of this area of business will increase the odds that your successor finds success after you exit.
Find the Right Interim Executive for Your Business Exit Strategy
Even if you’re just starting to think about preparing for exit, the sooner you bring on an interim executive to help you with the process, the better. InterimExecs has a proven process for matching smart companies with smart talent. The InterimExecs RED team is full of seasoned leaders with a wide range of experience, including CFOs who have helped companies hit home run exits.
To start the process of finding your powerful interim CFO or interim head or corporate development, call (847) 849-2800 or set up a discussion today.