4 Ways on How to Develop a Better Exit Strategy
In the beginning of your business and building your company must be truly focused on creating good product or service as well as generate revenue. But, when they had reached on a certain stage they want to acquired, they starting not getting their house in order. They only focus on one aspect and believe the rest can be taken care by itself.
Companies that only focus on one area and neglect the others are not good acquisition targets. Acquirers care about everything fro contracts to HR to sales pipeline. Now, here are the four ways to be a better acquisition target:
1. Avoid the “Super VP” trap
Many CEOs come from functional area of business as example, marketing, sales or engineering. The temptation of CEO role is to continue to focus on what they know and do best. For example, CEO from sales sometimes jump in to close a big deal but it may be useful at times but spending to much time in one area, in other words “Super VP” totally a quick way to failure.
Acquirers are looking to minimize risk. When one area of business is poorly run, it increases the risk for the acquirer.
2. Build mature system and processes.
In early organization’s founding, entrepreneurs had to make up for the lack of processes and system with talents. This is only temporary and somewhere north 25 to 50 employees, when the business is starting to take off, entrepreneurs need to put the “engineer’s hat” and invest in more sophisticated system and process that can help to run the company more efficiently.
Sometimes, CEO think they can get by without knowing their proper business system and processes or maybe they don’t want to spend money. Other times, the business is growing fast that the system and procedures can not keep up. So, failure to do so will inhibit the growth and the ability to attract potential acquirers.
3. Strive to be world – class in every department
Just simply buying new software is not enough. CEOs have to make a priority to make sure every department functions at the world-class level. They need to work closely with the executive team to determine the key process in each area of business and then take a systematic approach to improve each one.
Some companies will have a COO who may take primary responsibility for this work. If not, the CEO should regularly review metrics and focus on the processes that make the biggest difference to the business. Leaving this role entirely up to the members of the executive team means the CEO often won’t have the knowledge needed to make effective decisions when issues escalate and all of this starts with hiring the best people possible at every level in the organization.
4. Get the financial side of the house in order
Every department is important, but prospective acquirers who cannot make sense of company’s finances will make a low ball offer or quickly walk away. CEO advisor Bob Barker of 20/20 Outlook recommends that start-ups have two years of audited numbers to help “potential acquirers get a rapid and reliable financial picture of the business, a key step in accelerating their interest. This immediate positive step doesn’t require deep thought — just do it.”
CEOs and leadership teams often focus only an exit. They don’t strive to build the finest business they can, diminishing their chances of getting the best deal possible for themselves and their stakeholders.
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