Planning for a Successful Exit: Three Things You Can Do NOW to Get “Deal-Ready”
Most entrepreneurs dream of selling their company one day. While the possibility of an exit might seem years away, there are things you should do now to prepare for a smooth and successful process. And, even if you don’t plan to sell, these are entrepreneurial best practices that will help strengthen your business in so many ways.
Gather all of your paperwork into a “Corporate Book.” You should keep a hard copy for easy reference as well as a digital copy. This should contain all your business formation documents, any trademarks or copyrights, shareholder agreement, cap table, convertible notes, and any current contracts that you regularly use to run your business (NDAs, employee agreements, Service Level Agreements, etc.)
Timing: As early as possible
Professionalize your financial management and recordkeeping. We did this by hiring a good accounting firm, a part-time controller and a Fractional CFO, who all worked together to professionalize our reporting, forecasting and scenario planning. They used tools like Xero and Jirav to digitize and share our records. As a founder this made it very easy to access the latest data, as well as revise our forecast when big deals moved in and out of the pipeline. We met once a month with our Fractional CFO to review the forecast, our sales pipeline, our scenarios (A, B and C) and confirm our underlying assumptions. Ideally, by the time you begin to explore a sale you will have two solid years of professional financial records to share with potential buyers.
Timing: 2-3 years before selling
Talk to other entrepreneurs who have sold their companies. While you are building your company, don’t forget to build your network of other entrepreneurs. Their collective wisdom is as good as gold! Your network will serve you well when it comes to vendor recommendations as well as referrals to potential deal lawyers and M&A bankers. Talking with other exited entrepreneurs will also give you insight into the deal process and valuable information about how to prepare.
Timing: 2-3 years before selling
Stay tuned for a breakdown of my company’s acquisition and lessons learned!