Giving Your Business ESPSM
Chris Andersen
President
425 Market St., #2200
San Francisco, CA 94105
415-648-5517
[email protected]
What is Business ESPSM
Exit Strategy Plan
2
Business ESPSM Essentials
3
1.
Determine When and Why to Sell.
2.
Understand Valuation Drivers for Your Industry.
3.
Prepare the Business for Sale.
4.
Know Who Can Buy Your Company.
1. Why to Sell
4
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Burnout
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Approached by Buyer
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Diversify Wealth
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Other Venture
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Reached Limit of Resources
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Retire
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Death, Divorce or Disability
2. Valuation Drivers
5

Buyers Competing for Your Company
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Differentiated Products or Services

Outlook for Your Industry

Transaction Structure
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Type of Buyer

Strength of Your Business (Financial &
Operational)
Example:
Little Things Make a Difference
Company A
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Business Services
Revenue at $10.3M, +3%/yr.
$1.25M EBITDA
$950K assets (poor controls)
Loyal employees
Limited management team
Valued at 4.0x EBITDA,
or $5.0M
6
Company B
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Business Services
Revenue at $9.7M, +12%/yr.
$1.5M EBITDA
$400K assets (good controls)
Loyal employees
Good management team
Valued at 5.5x EBITDA,
or $8.25M
Company B Worth 65% more, or $3.25 million.
3. Prepare, Prepare, Prepare
Tell a Credible Story that Holds Up
Through Due Diligence.
1.
2.
3.
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Makes the Process Easier
Leads to a Higher Price
Time the Market for Your Industry
Tell the Story
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Good Growth Prospects
Strong Key Performance Indicators - Industry
Proven Trends & Profitability
Good Management Team
Repeat Customers w/ Low Concentration
High Employee Retention
Prepare for Diligence
9
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Well-maintained Financial Records &
Controls  Including Inventory or Materials
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Strength of External and Internal Agreements
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Documented Policies and Processes
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Mitigate Litigation or Environmental Issues
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Compliance – Regulatory, Accounting, etc.
No Negative Surprises.
Build a Team
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Advisors
Merger & Acquisition (M&A) Advisors
Transaction Attorneys
Tax Planning Accountants
Financial Advisors
Facilitate Meetings to Communicate
Your Goals with Entire Team
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4. Types of Business Buyers

Financial Acquirer
–
–
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Strategic Acquirer
–
–
11
Private Equity Group (Complete or Partial Sale)
High Net Worth Individual
Competitor
Company in Complimentary Industry
What Strategic Buyers Want
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Sell All of Co.
Innovation (New Products, Services or IP)
Looking for Synergies
Customers
Grow Revenue or Cash Flow
Geographical Expansion
Expect a New Culture
What Financial
Buyers Want
Sell All or Part of Co.
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Returns on Invested Capital (20+% irr)
Strong Company with Growth Opportunities
Continuity/Succession for Management
Culture Often Preserved
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… And in Conclusion
1.
Determine When You Want to Sell
2.
Understand the Drivers
(and Detractors) of Value
3.
Prepare Your Business For Sale
4.
Position Your Company to
Appeal to the Right Buyer