Great Advisory Teams lead to Great Exits
I’m going to be blunt: Don’t kid yourself you can achieve a highly successful business exit without a great advisory team.
I can already see the expression on your face. If you’re like most business owners you are great at solving problems and getting things done yourself, and reluctant to shell out for external advisers unless it’s really necessary. After all, unlike executives in large companies, you effectively pay for advice out of your own pocket.
In my last few posts we started looking at my four “pillars” for getting the best exit deal. Pillar 2 is: Put a great advisory team in place.
In my next few posts we will look at why a great advisory team is so important, who you need on your team, what they should cost and how to get the best out of them.
Why is your advisory team so important?
The key reason you need a great advisory team when you exit your business is because you’re usually dealing with issues that:
- Are outside your areas of expertise and experience.
- Are highly technical.
- Require a lot of resources to work through.
Think about it. Have you bought and sold a lot of businesses? Do you or your management team have the specialist technical expertise to deal with all of the issues likely to arise during your exit? Do you have enough management resources to do everything required to sell your business well and keep it running proﬁtably at the same time?
If your answer to any of these questions is “No”, I strongly recommend you appoint well qualified and experienced advisers to assist you with your exit. Importantly, having advisers doesn’t mean giving up control of your exit process or decision making. You still call the shots and make the final decisions.
Types of advisers
It’s useful to think of your exit advisers as falling into two broad categories:
- technical advisers, and
- leadership advisers.
Technical advisers deal with legal, accounting, tax, ﬁnancial, structuring and transaction issues. They include lawyers, accountants, tax specialists, ﬁnancial advisers, business brokers, corporate advisers and investment banks.
Leadership advisers deal with the “people” stuff, or what are often called the “soft” issues — ironically often the toughest issues to work through during business exits. These advisers include business coaches, business growth specialists, HR specialists, family business advisers and business exit advisers.
So, who do you need on your team?
Don’t worry; you don’t need all the advisers I’ve just mentioned!
Who you need depends on three things:
- The size and complexity of your business.
- The size and complexity of your potential buyers (and the advisers they are likely to use).
- How well prepared you actually are for your business exit.
If your business is on the smaller side, and you’re likely to sell to a buyer who is a similar size, your core team would usually consist of a business broker, accountant and lawyer. You also need support on the leadership advice side — if you already have a business coach, mentor or advisory board, that will probably be sufﬁcient. If not, I suggest you look for a specialist business exit adviser.
Whether you need other specialist input will depend on your circumstances. For example, if you need to do some work to protect your intellectual property, or there are tax issues which are beyond your accountant’s expertise, you may need specialist advice in those areas.
If your business is larger, you will have a similar core team, but probably use a corporate adviser rather than a business broker. Good corporate advisers are generally found in either standalone corporate advisory practices or larger accounting ﬁrms. If your business is particularly big, you might even look at using an investment bank.
If your business is larger it’s more likely you will sell to a much larger business again, and you can be sure these buyers will use high powered teams of lawyers, accountants and corporate advisers. You therefore need to make sure your own advisers are right up to scratch so you don’t get steam-rolled during negotiations.
You may also need to consider specialist advice in areas such as tax, intellectual property and human resources. I find a lot of business owners overlook the fact that many buyers will view their management teams as a critical element of their business. If this is the case, an HR specialist can add a lot of value to your business exit by ensuring a smooth transition of your management team to the buyer.
There are two other situations that may call for specific expert advice, whether your business is large or small:
- If you have a classic family business (i.e. family members who work in the business and/or own part of it), your business exit needs to take this into account. It can be useful to have a family business adviser help you work through these issues.
- If your business isn’t well prepared for exit or you want to start planning your exit early (something I always encourage), you should consider using a business coach, business growth specialist or business exit adviser to assist you.
Finally, you also need to consider the sort of advice and assistance you need personally as you transition to a new life post business exit — for instance, from a business/life coach and/or ﬁnancial adviser.
From my experience, great advisory teams often pay for themselves many times over during business exits. In my next post, we will look at how to ensure you get great value from your advisory team.
Geoff Green is a well‑known business exit strategist, entrepreneur and corporate lawyer. He is also the author of The Smart Business Exit, Getting Rewarded for your Blood, Sweat and Tears.