James Caan: Getting your exit strategy right

After all, if you have spent years nurturing the business, you want to ensure it is sold to the right buyer and that you get the best value.

The exit process itself can be complex and emotional, but it needs to be detailed. This is not something you should do in the space of a few months – to get the best results you need to have actually prepared it for exit.

When I wanted to sell my first business, I was stunned when the experts valued it a lot lower than I expected. We were one of the most successful recruitment businesses around; however the experts weren’t just looking at that. They were concerned with the fact that the business was built heavily around me. Quite simply, nobody wants to buy a business that will crumble if the founder is no longer there.

So I spent the next few years ensuring the business was less reliant on me. I added additional layers of management, I brought in an Executive Chairman and I implemented more processes. I looked at any inefficiencies, for example our technological systems which needed updating. Although it was almost 5 years before I finally sold it, the returns I got were substantially more.

Think of this process like selling a house. Would you really start bringing potential buyers around for viewings before the walls were painted and the large cracks had been covered?

A buyer will want to ensure that the team can support the business going forward, so you need to ensure you have a strong senior management structure. Offering them shares can be a great driver here – remember the whole point is that things continues to run like clockwork after you have left the business.

Remember that the value of a business is achieved in a number of ways. There are many tangible factors – for example profitability, the strength of the order book, the number of long-term customers you have and the value of all property and assets. However there are also things such as the strength of the brand which may not be as easy to quantify, but can have a huge effect on the way you are viewed.
This leads me onto something that I call the ‘opportunity map’. Essentially this is the story of your company. I don’t just mean your journey so far, but what you will achieve in the future. Think about growth opportunities and expansion plans – the more detailed and successful these are, the better the value of the business.
Finally, think about the buyers. Do you want to sell to a competitor, someone overseas or perhaps some sort of investment fund or private equity firm? Every buyer will have different intentions so you need to think very carefully about this. If many of your employees are still remaining with the business, think of how each buyer’s motives could affect them. Essentially, just as they will conduct due diligence on your business – you should be doing the same to them.

Image: concept of exit strategy via Shutterstock


James Caan

James Caan CBE is one of the UK’s most successful entrepreneurs. He made his fortune through the global success of his Recruitment companies, Alexander Mann and Humana International, before founding private equity firm Hamilton Bradshaw in 2004. He is best known for joining the panel of the hit BBC show Dragons’ Den, and more recently, The Business Class on CNBC. A passionate supporter of small businesses, James chairs the Government’s Start Up Loans scheme, which provides funding and mentoring to budding entrepreneurs.

About James Caan

James Caan CBE is one of the UK’s most successful entrepreneurs. He made his fortune through the global success of his Recruitment companies, Alexander Mann and Humana International, before founding private equity firm Hamilton Bradshaw in 2004. He is best known for joining the panel of the hit BBC show Dragons’ Den, and more recently, The Business Class on CNBC. A passionate supporter of small businesses, James chairs the Government’s Start Up Loans scheme, which provides funding and mentoring to budding entrepreneurs.