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investor exit strategy: selling the company

One of the most valuable concepts when it comes to making an efficient investor exit strategy is to sell the company. This is a tricky thing to do and for a young entrepreneur, it may take some time before this can be done right. Most management thinkers and entrepreneurs believe that while selling the company remains the most viable and lucrative exit strategy, this is something that may take decades to learn and master.

If you have designed your exit strategy well, it increases your business valuation by at least 50% and if you’re really good, by 100% as well. While this may sound simple at the outset, the truth is that it takes years of hard work to make this kind of an exit transaction. If you have worked hard for a few years, to build a company that you can be proud of, dismantling it and selling ot off on a market may not be a very easy thing to do for you personally.

If the value of your business, at the time of your deciding to exit it, is £10 million, you can sell it for £15 Million and even £20 Million, if you play your cards right. Most people will tell you that you need to be extremely lucky to be able to do that, but the truth is that your exit plan should be extremely well designed and executed to make this kind of a sale.

To understand how you can do this, you have to first understand how the value of shares changes during the lifecycle of the company. There is no smooth or linear growth when it comes to the valuation of the company. You can have steep growths in specific periods of time when the economy is favourable and when the markets are benevolent. These steep increases will also ideally occur when you execute your efficient strategies successfully.

The share value always rises earlier in the company’s lifecycle when you execute strategies such as partnerships, acquisitions, mergers, marketing alliances and finally the launch of new and improved products or services. These are all strategies to improve investor confidence in you and your business so that the share value begins to climb up. With these strategic initiatives in tow, you can always continue to increase your business valuation. However, behind a highly valued company lies a dynamic leader spearheading a strategic movement and leading hardworking workforce.

When you look at the markets for selling companies, you will realize that these are not as mature. The markets are, at best, inefficient and you have to have a good strategy to be able to sell your business for a good value. When you have to sell your company, be prepared for some amount of struggle because there are very few buys of companies that are established. Most people want to start their own companies instead of buying one. the market itself is not liquid, which means there is hardly ever enough cash floating around for entrepreneurs to be able to buy a business.

Fortunately for you, it is this inefficiency of the market that helps you sell the business making a neat profit of 50% or more on its valuation. There is a high degree of variability when it comes to the strategic value. Broadly speaking, this is the increase in the total value of the company, above its actual financial value.

There are ways to communicate the strategic value of the company to prospective buyers. If you are able to convince others that buying your company is the right way to peddle ahead in the market, and that it would lead to strategic gains, you will be able to sell your company for a rate much higher than others.

You have to realize that when you plan to sell off your business, this cannot be a closed door deal with a single interested party. If your business has any value, you should make its sale open to bidding by multiple bidders. If there is active bidding, it ensures safety for your business as well as price maximization. Multiple bidding also allows you to have the ability to negotiate successfully.

There are standard marketing and sales issues involved in the transactions of these kinds. However, these sales are complex and there would be a more rigorous effort required to make sure that the sale goes well and to the expected end. The size and complexity makes selling a company slightly different from the sale of other products. However, save for that, all the other processes are standard.

Most of the times, the sale of the company comes down to the skill of the sales people. How much your company sells for, is usually dependent on how well the sales people are able to market your company. Even if you play all your cards right, there is a huge human element that you should consider when you are planning to make the sale of your company. Like any other average human, your investors also have their own individual quirks and personalities. Even your potential buyers have their own abilities and perceptions about your business. It is not rare to see that your plans of selling the company at a good price are coming true, only to find at the last minute that the plans have fallen susceptible to the quirk of a wealthy investor.

It is also important to understand that your business is one entity where you get as much as you put in. potential buyers usually don’t just flock down to your door when you put up a ‘For Sale’ sign outside your door. It takes the buyers some time and a lot of deliberation to come up to a decision to buy your business. The markets usually are not your allies when you set out to make such a sale.

Another important thing to consider is that someone else performs the valuation of your business. If you want to have your business valued at a high end, you need to make sure that all your accounts are impeccable and that you have maintained high standards throughout the operation of your business. If you are successful in pulling this off, you will realize that there is nothing that can compare to this as an exit strategy.