Preparing a business for an exit and the inevitable due diligence it will go through is more of an exact science than designing an appropriate exit strategy. Exit strategies involve grappling with the uniqueness of founders, buyers, and individual businesses. Exit readiness addresses the kind of “deep engineering” that is common in all businesses.
While there is still, obviously, some variance involved (for example, the way you prepare for an IPO will differ from filing for bankruptcy or selling a business to a family member), the commonalities in prepping businesses for exits are really significant.
For this reason, we developed our “F.I.R.E.” model to accelerate exit prepping, and align founders on the most important aspects of their exit readiness as quickly as possible.
The F.I.R.E. acronym stands for the following:
Foundations: this module covers the main aspects relating to your corporate and ownership structure, and includes three basic elements: (i) your corporate structure, (ii) a tax optimization analysis, and (iii) a core partnership analysis. All three of these elements should be reviewed and designed in line with your ideal exit type and key exit player.
Intangibles: since intangible assets count for a significant majority of enterprise value and they require positive steps to secure, this module covers the following (i) intellectual property strategy, (ii) protection of intangible assets, and (iii) data protection and privacy compliance to ensure legal acquisition of data assets and personal information.
Relationships: relationships – both internal and external – are the lifeblood of any business. This module covers (i) internal agreements (service agreements, employment agreements, etc.), (ii) external agreements (client agreements, distribution agreements, etc.), and (iii) strategic partnership agreements.
Environment: finally, every business operates in an environment of laws, regulations, and competitors. This module includes regulatory compliance, and building an industry profile.
You can download our full F.I.R.E. checklist here, check out your score, and figure out what you need to do next to build up your business’ exit readiness.
These exit-readiness tips can take time to properly implement, and naturally, there are levels to how in-depth you can go with each item.
We recommend scheduling one quarter to fully assess your business and give it an implementation push. From there, you can schedule some time every quarter, or at least once or twice a year to review the business top to bottom, and spot places where you can upgrade your exit readiness, with the help of your professionals. We also recommend building and maintaining a digital data room in parallel to this, which will accelerate the process when you are ready to commit to a transaction and to proceed to due diligence.
You can also download our Digital Data Room template here.
Finally you can schedule a call with one of our exit coaches to discuss your exit planning in more detail.
To your journey,
Fred and the Fit to Exit team