In the past, buyers might have overlooked the lack of formal governance in an entrepreneurial business if the numbers stacked up and the opportunity looked compelling.

Today, things have changed.

With increased regulatory scrutiny, more sophisticated buyers, and the rise of ESG (Environmental, Social, and Governance) standards, strong governance is no longer a “nice-to-have”; it’s a must for any business looking to maximise value at exit.

If you want to attract premium buyers and achieve a seamless, high-value sale, your governance needs to stand up to due diligence. Here’s why governance matters so much, what buyers expect, and how to get your house in order.

1. Governance Builds Buyer Trust

Good governance is a sign of a well-run, mature business. It signals that you have the discipline, transparency, and risk management practices that buyers need for peace of mind. When buyers see robust governance structures, they know:

– The business is compliant with laws and regulations

– Financial reporting is accurate and reliable

– Risks (legal, financial, operational) are identified and managed

– There’s a clear decision-making process in place

Buyers are more likely to pay a premium, and move faster, when they trust what they’re buying.

2. Weak Governance Raises Red Flags and Lowers Value

Poor governance is a leading deal-killer. Gaps in compliance, unclear ownership structures, missing board minutes, or ad-hoc decision making can trigger exhaustive due diligence, price chips, or deal collapse.

Common governance pitfalls that turn buyers off:

– No regular board or management meetings, or missing records

– Lack of clear policies on conflicts of interest, delegations, or approvals

– Unresolved shareholder disputes or ambiguous agreements

– Weak controls over financial processes and approvals

Buyers fear what they can’t see and the unknown usually means a lower offer or increased risk premiums.

3. Governance Aligns with ESG and Modern Buyer Expectations

The best buyers, especially corporates, institutional investors, and private equity, are placing more weight on ESG criteria, with governance right at the centre. Businesses with clear, documented governance can demonstrate alignment with:

– Diversity, equity, and inclusion standards

– Anti-bribery, anti-corruption, and whistleblower policies

– Transparent reporting and disclosure

– Clear succession planning and board oversight

If you want to appeal to the widest buyer pool and maximise your exit value, strong governance is essential.

4. How to Strengthen Your Governance Before Sale

– Formalise your board or management meetings. Keep minutes, agendas, and action logs.

– Document key policies and procedures. From expenses to ethics, ensure staff know the rules.

– Review shareholder and director agreements. Make sure they are up to date, unambiguous, and assignable.

– Conduct a compliance audit. Address any legal, regulatory, or policy gaps before due diligence.

– Build succession plans. Demonstrate how the business will continue to run well after your exit.

The Bottom Line: Governance Is Value

Strong governance reduces buyer risk, increases trust, and can be the difference between a smooth, premium sale and a protracted, painful process. It’s a powerful signal that your business is not just successful but sustainable.

Your Exit Starts Here

If you’re wondering whether you’re truly ready to sell, don’t leave it to chance. Take the Exit Readiness Survey today at www.chalkhillblue.org/exitreadiness-survey and get a clear picture of where you stand, and what to do next.

Looking for the complete roadmap to a successful exit? Order The Exit Roadmap by Chris Spratling on Amazon – a practical, step-by-step guide for ambitious entrepreneurs ready to maximise value, minimise stress, and exit on their own terms.

For more insights and real-world advice, follow Chris Spratling on LinkedIn. Start your journey to a successful exit with clarity and confidence.