Exit Strategy

Top 7 business sale considerations

  1. Profit is king – Buyers pay for earnings, not revenue.
  2. Size matters – Larger, more profitable businesses fetch higher multiples.
  3. Diversify your revenue – Significant customer concentration is a risk factor.
  4. Keep good books – The quality of your accounting can make or break a deal.
  5. Consistency matters – Profitability must be demonstrated over time.
  6. Not every business is sellable – Your business must be viable without you in the equation.
  7. Timing is crucial – Start preparing 18-36 months in advance and sell at your peak.

Crucial questions to answer

  • Begin with the end in mind – What is your desired outcome?
  • Confront the brutal facts – How much is this business worth to a potential buyer?
  • If you fail to plan, you are planning to fail – What is your exit strategy?
  • You get what you negotiate – On which elements of the deal can you be flexible?
  • Plan your execution, execute your plan – Will there ever be a perfect time?

Exit strategies to consider

Transaction Type**Key Requirement
Sale to family membersFamily is interested and ready to take over
Sale to employees (ESOP)Successor management must be in place & ready
Sale to partnersPartners must be in place and ready
Sale to third partyThird party must be identified
Recapitalization transactionManagement capable of running business  
Orderly liquidationMarket for specific assets must exist
Qualified Plan / Cash BalanceProfitability, compensation/age disparity, and time
**NOTE: Certain services offered in conjunction with B. Riley Financial affiliates.

Let’s talk about options for your business legacy

It might be your first time to sell a business, but it’s not ours.