THE EXIT or REGROWTH STAGE

Some businesses reach this stage sooner. There are serial entrepreneurs that build up businesses with the aim to exit by selling the company. This company will then go through the expansion stage with new owners. Sometimes, they are acquired and merged into a bigger company. Some other businesses take on investors and give up some shares to have new partners or shareholders. 

Businesses at this stage are matured and stable. They have strong management teams, clear objectives, steady finances and strategic planning. Of course nothing can stay at the top without constant effort and innovation. Without innovation, it is only a matter of time before your competitors catch up and your company starts to decline. You need to decide if you’d like to push through or cash out.

If you have the drive and appetite for risk, pushing through requires you go through further expansion. You will need to analyze if further growth is possible in the market that you are in. You will also need to know if your company can stomach the impact should the plan falls through. Typically, businesses at this stage would have saturated the market and will have to consider product innovation or diversification as they are financially stable. The risk from diversification can be mitigated by reviewing all of the company’s assets including the supply chain and assessing if they can contribute to the new business. One clear benefit of diversification is that you can rely on the other business in the event of a downturn, since different factors effect different industries. For example, your restaurant business is affected negatively by a health scare, however, your online business selling jewellery is not affected.

If you decide to exit, then your focus would be on the performance of the company, its assets and its debts. Basically, the valuation. Exit circumstances can vary and are not the same every time. For example, you have been running the company for 20 years and you’re ready to let it go without having any control of the company. Your team of managers can pull their finances together to buy the company from you. This is a management buy out. Or you could sell your equity to one of your partners at an agreed price. Another scenario is to sell to another company. If they combine it with their company, it would be a merger. If they take over without merging it, it’s an acquisition.

There are many different scenarios and different ways to sell a company. It can be sold fully, partially, based on assets only or based on the balance sheet. You will need to work with your finance person or there are specialists that can help determine a fair value for your company.

Valuations are always a pain point but a brand with a strong image and presence contribute to the valuation as well.