Frequently Asked Questions

It can take anywhere from 3 to 5 years to put the right pieces in place.  For instance, you will need to prove strong financials with documented history that goes back at least 3 years. You must have well defined roles for your management team along with and in-depth reporting systems that convey a strong sense of controls. Once this is done, you can anticipate at lease one year to identify a buyer and go through the due diligence and negotiation process.

This of course depends on a number of factors such as your age, company profitability and health of the organization. Selling when the company is on a growth curve is clearly much better than trying to sell a sinking ship. Timing is critical.

The value of your business is almost entirely based on the desire of the buyer to acquire it.  If nobody is interested, then the value is zero. If your business is super attractive, you will get a lot more for it.  Think of Exit-Plan as a coach that will help guide your business towards greater success in preparation for the sale. We will work with you to help you grow your business, help identify opportunities and accentuate the pointers that will drive the value up in a would-be buyer’s eye.

Absolutely.  Exit-Plan commands a wealth of knowledge in areas such as product development, manufacturing, off-shore and domestic sourcing, Canada, US and International sales & distribution, branding, marketing, packaging, financing and of course management.

Most valuations begin by looking at net profits – after all expenses before taxes.  This is also known as EBITDA.  The usual starting point is a four-times multiple of the ‘true’ net profit.  The multiple can be much higher depending on the sector and growth outline.  Another key factor is good-will.  The good-will of a company is made up of intangibles such as a brand name, patents and trademarks.  Other factors such as equipment, inventory, real-estate and future orders can also play a significant role.

No. This is where Exit-Pan can truly bee of benefit to you. When selling a business, the value can range dramatically depending on how the business is ‘packaged’, the type of buyer that is being targeted or the situation at hand.  In one case, the business owner wanted to show a low value when going through a divorce and a high value when selling a few years later. Exit-Plan successfully presented two pictures that shifted the value ‘picture’ by a factor of six which in turn allowed the seller to retire comfortably.

Exit-Plan™ will not typically represent your company when you are ready to sell.  Merger and Acquisition (M&A) specialists are experts in the field that have long lists of potential buyers and know how to create demand.  These companies are not inexpensive but have a level of expertise that includes negotiation tactics to maximise the value of your business and important advice that will protect you after the sale is complete.

Preparing to sell a company can take anywhere from 3 to 5 years. During the first couple of years, Exit-Plan™ will help you prepare for the eventual sale of your business by identifying the holes that need to be filled in effort to gain the maximum payout on your investment. Preparation is critical. When you are ready, the M&A firm will work with you to put together a list of potential strategic buyers or bring forth a host of investors. It will then formalise a ‘sales pitch’ for potential buyers and possibly put your company out to auction, depending on the size, value and target buyer.

A good M&A firm is expensive. Selling a company that is valued at $10 million-dollars can cost upwards of $500,000 (5%) plus legal fees and out of pocket expenses.  Because they are paid a commission on the ‘success’ they can be instrumental in keeping the buyer motivated to get the purchase done in a timely fashion. Exit-Plan™ can help you negotiate these fees based on the valuation and the target sales price that is eventually achieved.

Specialists such as tax accountants and lawyers will eventually be brought in when putting together the purchase agreement and all of the other documentation to ensure the transfer of ownership and funds is done properly and to your greatest tax advantage. The last thing you want is to be caught up in an expensive legal battle.

Exit-Plan™ charges an hourly rate for consulting.  Most clients engage us with a monthly budget of about $2500 a month.  During the discovery period, we will look at your business to give you a sense of value and provide an overview of options that we believe will play key roles in improving the sell-ability of your company.  We usually suggest a modest monthly budget as it will take time for your team to implement the suggested changes.

The size and profitability of your business will determine the price and type of buyer to target.  Exit-Plan™ looks at a host of factors to ensure your company is set up for sale. This includes internal systems, staffing, budgeting, sales forecasting, and non-tangible assets such as ‘good-will’ in the form of branding and distribution channels to create a vision. Creating a rosy picture for the buyer with strong future earnings potential is essential.

Yes. It is also frustrating, cumbersome, disruptive and will pose a lot of strain on your financial department.  You must get all of your ducks in a row and be prepared to answer all kinds of questions that may seem ridiculous or confidential.  The good news is that all of the work you put in in preparation for sale during the first couple years will generally increase your sales and bottom line profitability. This extra income is yours to take out when the deal is done.

It depends. If you want to walk away quickly, a strategic buyer is a good option as they will be able to take over the reins without taking up too much of your time. If you want to stay on and are comfortable with working under someone else, then an investment buyer could be a good choice. These typically pay out over time, but the value of your sale can increase depending on future profitability and how the deal is structured.

Strategic buyers tend to be in the same business or have a desire to enter into a particular business segment.  They can often come in and take over immediately as they have an experienced management team that know your business. Investment buyers tend to want to retain your services and gain your know-how for a number of years and buy you out over time as a means to protect and grow their investment.

Selling to family, management group or long-time employees can be an option particularly if you intend t leave legacy. These scenarios tend to result in a lower level of compensation or may require a longer pay-out schedule versus selling to outside investors as these buyers usually do not have deep pockets. There are however banking options that can be had that can deliver an immediate payout and set you on your way to retirement.

No.  You can go through months of gyrations and end up with nothing.  This is where you want to make sure you do your due diligence to ensure the would-be buyer has the financial wherewithal to actually come up with the cash.   This of course requires diligence on your part and your M&A specialist.

An asset sale typically involves selling the hard assets of the business - not the business itself - while a share sale, includes everything along with liability. This can have tax ramifications depending on the tax rules in your jurisdiction. A sole proprietorship generally does not have shares, while a limited corporation does. Consulting a tax accountant is important when making this decision.

Yes. The hold-backs are kept in escrow for a period of time to enable the buyer to ensure the information you have provided is true and accurate.

Yes.  This mostly occurs when working with strategic buyers as you may have identified a perfect candidate that will bring a strong symbiotic benefit to both companies.  Exclusive and confidentiality agreements are generally put in place after a letter of intent has been drafted, and these ‘options’ are usually time-limited so that negotiations do not end up languishing for months on end.

No.  You can only suggest that they do. The best approach is to put together an attractive package that outlines the reasons why these key individuals are important to the business. This will entice them to keep them on. At the end of the day, they must be given the freedom to run the company as they see fit.

There are several. The first is owner ego. Most entrepreneurs believe that they can do it all and do not need outside expertise or someone to tell them what changes they should make. The next is timing. Most people put things off until it is too late. One company had sales of $30m and was a market favorite.  By the time we began discussions, sales had dwindled to $10m, they had lost key players in their team, and there was nothing left but a shell. A year later, sales dwindled further and they likely only got about $3m. In another instance, the business owner contracted cancer. Finally, one has to be realistic as to the valuation. Investors only care about one thing: How to make money from their investment. If you present the right picture, they will buy.