Situation: A CEO is considering an exit strategy for the company that she founded. The company has been very successful, and the CEO wants to optimize the value of the company on sale. She seeks advice on how to both maximize the company’s value and how to best prepare for a sale. What’s your exit strategy – both timing and price?

Advice from the CEOs:

• Value is tied to revenue and profit growth. Revenue growth is based on expansion of the customer base and reshaping the product offering to optimize its market appeal.
  • Consider a usage-based price for the offering. Accompany this with a range of usage offerings based on current customer use patterns.
  • Consider tiered pricing or pricing/use to access lower tiers of the market.
  • Consider bundled products, for example along with complementary products of another company with whom marketing partnerships could be formed.
• As part of the valuation exercise, determine the best exit strategy and timing:
  • Identify the companies that could be buyers.
  • In each case, identify why they would buy the company.
  • The most compelling reason to purchase the company will be strategic, not financial.
  • Identify the key decision maker in each of the potential buyers.
  • Also identify any factors that would make the company less desirable to any potential acquirers and develop remedies for these.
  • This exercise may help to plan the timing and to understand more about the price that could be fetched.
• To appeal to a buyer, optimize the organizational chart.
  • If the CEO occupies too many seats on the chart this presents a substantial risk to an acquirer if the founder leaves.
• Evolve the organizational structure to support growth.
  • If there is no compelling reason to sell in the near term, then staff the company with professional marketing, financial talent, and so on.
  • A lack of talent in key positions limits both the company’s growth and its appeal to potential buyers.
  • In the case of this company, the most important hire will be in marketing. Note that marketing does not equal sales. The company is creating a market and convincing people to change their habits. This is a marketing task, not a sales task.
  • If the analysis of the factors mentioned above determines that now is time to sell, then stay slim.

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