Are you ready to sell?

Selling a business can be a lengthy process. Or perhaps the best way to phrase it is that selling a business should be a lengthy process.

The idea that a business owner decides to sell one day and completes the transaction the next – or even the next week or the next month, for that matter – is simply not realistic.

Even the seemingly simple issue of whether you’re ready to sell your business is a critical step that requires lots of time, energy and question asking before any conclusion should be reached.

Baker Tilly hosted a panel discussion entitled “Are you ready to sell?” at Service Titan’s Pantheon 2022 Conference. Baker Tilly's Marcus Wagner led the conversation alongside Robert Sheesley, the Chief Information Officer at Wrench Group, and William Matson, the president and co-founder of Apex Service Partners.

Wagner represented the sell-side perspective, having sold his company (AcctTwo Shared Services, LLC) to Baker Tilly last September. Sheesley brought to the table his expertise in global M&A transactions systems, processes and data science and Matson offered his private equity specialization to help facilitate a thoughtful and interactive three-way dialogue.

Examining the elements of a winning playbook

At a high-level company perspective, a winning corporate playbook includes elements of marketing, sales, supply chain, legal, human resources and many other areas. For the purpose of this discussion, Wagner and the panel focused on one of the other key areas of a winning playbook: Finance and accounting.

(Let’s define a “playbook, as an action plan that an organization puts in place to help achieve its goals.)

Baker Tilly’s playbook, as you can see in the adjacent graphic, revolves around a foundation of scalable infrastructure. From there, our playbook has five key components, beginning with proactive planning and concluding with funding and exit readiness.

Each of the five key areas is highlighted in greater detail below:

• Proactive planning: The days of doing a budget once a year, getting it approved and setting it on the shelf for the next 12 months are long gone. In reality, proactive planning is about visualizing where you want to go as an organization in a living, breathing manner. Realistically, you need to monitor your systems weekly and constantly evaluate how the results compare to the original plan. That mindset of proactive planning and regular evaluations allows you to make adjustments and improvements throughout the year.
• Sound transaction management: Organizations need to set up their systems in the right way. What does that mean? Well, a way that captures data in a structured manner and then automates and optimizes all the processes. And it needs to be the right data at the right place – at the source. That’s the key to getting accurate, valuable, real-time feedback about your business. Furthermore, it is critical to understand your KPIs and to have both lagging and leading indicators when you’re preparing for a potential transaction. Additionally, your KPIs need to align with the organization’s culture. Only once you understand your environment and what has driven your growth (and will continue to drive your growth) is your organization capable of moving forward.
• Responsible cash management: An organization needs to know its cash requirements (which typically features a 13-week cash flow forecast), as well as the seasonality of its business. It is important to develop and maintain a cash reserve and know exactly how many payrolls the business needs to have in the bank. Another part of responsible cash management is being able to promptly provide GAAP financial statements (among other documents and information) in a timely matter, should banks request them.
• Timely reporting and analytics: Ten or twenty years ago, we lived in a business world built around systems of record, that provided historical data. These days, that isn’t good enough. You need real-time feedback and up-to-the-minute analytical data to keep pace with the speed of business and to interact with and adjust to your customers in real time.
• Funding and exit readiness: We divided our discussion on this particular area into four sub-sections, each featuring a key question for an organization to ask itself.
  
  Are you ready to hit it out of the park? How early should you start if you decide that you want to sell your company? That depends on a variety of factors. There is no one answer, but five years might be a good general guideline. There is a lot of work involved., start by identifying what you have and what you don’t have. You will need to organize your files, contracts, documents, succession plans, organizational charts, etc. Nobody has it all laying around, so get started early. Your preparedness and readiness in this area will add immediate credibility to the organization when you’re ready to sell.
  
  Do you have a good track record? As part of the selling process, you’re essentially telling your story about the future by pointing to your past. Key elements of this include: Do you have a playbook? Do you explain how you have grown historically and how you’ll continue to grow? Can you detail the decisions you have made and the pivots you took as part of the decision-making process? As negotiations sometimes can take a year or more, prospective buyers may want to see last month’s numbers as part of their quest to learn your entire story.
  
  Are the numbers reliable? Connected to the last point, have you been getting regular audits done on your books? Buyers will do significant due diligence on your company. You may want to consider a quality of earnings review (which is like an audit, but focused on revenue and EBITDA). It’s not cheap, but it’s almost always money well spent. Meanwhile, not doing one can potentially destroy your enterprise value and can cost you millions in the long run.
  
  Are you ready for a graceful exit? This, of course, depends on what you want and what your timeline is. Whether you are ready for a graceful exit in six months is a lot different than whether you’re ready for one in three years. Additionally, it depends on what you want life to look like after the deal. Are you planning to stay in the business? Do you want to work closely with the buyers for years to come, or do you want a clean break and a future completely removed from the business? Finally, make sure you have financial advisors and tax advisors lined up long before the sale of the business.

Baker Tilly’s practice professionals can help you put the pieces in place well in advance to best prepare for a graceful exit and a successful sale of the business.