Deciding to sell your brand is a big decision for most founders. We recommend that founders start preparing 12-18 months before their desired sale date. The earlier you begin planning for an exit, the better.
Here are seven things founders can do to prepare for an exit and maximize their valuation. Disciplined and organized brands will have a smoother due diligence process and set themselves up for success.
- Create clean and organized financial statements - Make sure you have a balance sheet, P&L, and cash flow model in good shape. Be prepared to have annual and monthly P&L documents. Make sure you are clear on cash vs. accrual accounting in your methodology.
- Organize all customer, supplier, and partner contact information and contracts - This will be requested in due diligence.
- Develop an org chart with roles and responsibilities
- Focus on profitable growth - Most acquirers will want to see two years of growth and growth in your trailing twelve months. In today’s environment, interest rates are high, meaning profitability will be important to any acquirer, given that most acquirers use debt as a portion of their financing and the cost of capital has increased.
- Focus on operational discipline - Are there areas you could streamline costs or simplify processes? Doing these things now will make your company more valuable.
- Build a future forecast and be able to articulate the building blocks that will drive growth.
- Don’t do anything in the months leading up to the sale to disrupt the business -If you cut marketing spending by 50% in the 3-6 months leading up to a sale, an acquirer will see through that.
We'd love to chat and offer advice if you're considering an exit. We're actively acquiring better-for-you consumer brands in beauty care, personal care, baby care, pet care, health/wellness, and home care. Even if you're not considering a sale, we're building long-term relationships for the future. Let’s talk.
