James Davis, Positive Momentum

This will help you determine where the business is in its life cycle and therefore when is the right time to sell it. This plan needs to be as flexible and as adaptable as possible so that you can plan for different scenarios. Good businesses have what I call Key Predictive Indicators rather than Key Performance Indicators in place so they can get a better sense of the future of their business.

There is no point in maximising the business and then the buyer wondering what else they can do to make it grow even more. The buyer has to see some upside, so include some elements in your plan that are stretchable but achievable but also have other things you haven’t done yet but that could be done that would be exciting to another owner. The obvious one is geographic expansion – so typically a regional business that could become a national business, that could become an international one is potentially exciting.

They will not only understand the market and be able to identify potential buyers, but they can also start gauging interest and appetite for your business anonymously without you formally putting the business up for sale. They can also help you decide what type of sales process you want to run - options include a trade sale, a private equity sale and a public market flotation. It is really important to find advisors that you trust and respect and can build up a rapport with, because things can get pretty intense during a deal process.

Before you start the sales process, make sure your shareholders and the leadership team have decided what they want to do once the business has been sold, because that will determine the type of sales process you should run. The founder might want to spend some time on the beach, or alternatively might want to continue as CEO, while shareholders might want to stay invested in the business or take some cash out. Either way, make sure you have already had these discussions as you don’t want to be negotiating amongst yourselves, at the same time as the potential buyer.

A typical sales process will take between 6 and 9 months, so there is no point in thinking it will be done overnight. There is a standard process, and you just have to go with it because if you try to shortcut it, that may result in the sale not happening at all or lead to an unsatisfactory outcome.

I have seen it in several processes where people are so desperate to get the deal done that they give away key concessions right at the end as they have succumbed to “deal fever”.

If valuation is the most important factor, then an IPO is likely to deliver the best valuation. If you would like some of the leadership team to stay on and take the company through its next iteration, then private equity is the most attractive option. If speed is key, then a trade buyer is likely to be able to proceed more quickly than any of the other two routes.

That way you can respond quickly to an attractive offer or an IPO window. It can take 12-18 months to get a business ready for sale so start taking steps well ahead of time, so you are ready for the right moment.