EXIT STRATEGIES: Creating additional potential

Even if you have existing products, services or processes which can be scaled, or productivity projects which could be implemented by the potential buyers, there is a good case for using the time available until you sell your business to create new forms of value for the buyer.

One way you can do this is by changing your organisation, products, services and processes so that they become more compatible with those of the potential buyer.

For example, can your products be redesigned to better complement the current range of the buyer’s product portfolio? Are there new features you could add which would be of benefit to the buyer’s customers? Whatever you can do to make yourself or your products and services more attractive to the buyer will improve your value.

You might also look at where your potential buyer can use your current products, services or technology to open new revenue opportunities and to create new products, services or processes which they can exploit. What else could you do to enhance those opportunities?

Another possibility is to find ways in which you can increase productivity or reduce expenses in your operations which can be exploited by the buyer across a much larger organisation. Firms which sell commodity products can generate value by developing management applications or better business processes which can bring cost savings to a larger organisation.

Some businesses can create platforms for revenue generation even though they are not able to exploit it themselves. Thus developing IP and registering new patents may create potential value. Acquiring new rights though agreements, licenses, registrations, purchase options or outright purchase may also create potential value for an acquirer.

Once you have identified your potential buyer(s) you should consider how you can increase the value of the acquisition to them. You do this in a number of ways; making your business easier to integrate or transition to new ownership; providing products, processes and projects which the buyer can exploit; identifying ways in which you can bring revenue forward in time; and creating new ways in which additional value can be generated.

Each of these elements either decreases risk or enhances the profitability of the acquisition. Whatever you can do in these areas will increase the potential exit value of your business.

Tom McKaskill is a successful global serial entrepreneur, educator and author who is a world acknowledged authority on exit strategies and the former Richard Pratt Professor of Entrepreneurship, Australian Graduate School of Entrepreneurship, Swinburne University of Technology, Melbourne, Australia. A series of free eBooks for entrepreneurs and angel and VC investors can be found at his site here.