Just like staging a house BEFORE you put it on the market, you need to stage a business to attract investors or buyers, LONG BEFORE you think you want to attract investors or a buyer. Like at least 4-5 years. Except that buyers of businesses look back at least 3 years in their due diligence, which means staging the business is best done 4-5 years BEFORE putting it on the market. Few business owners look at the potential of getting investors or a full or partial sale of the business they have worked so hard in for so long with that strategic view.
How do you capture the value of the business as a going concern when the timing is most advantageous to you, the seller?
Typically, the more urgent the need to get investors or sell, the lower the sale price: you don’t have time to optimize the value, the option of seller financing may be eliminated, and transition management or assistance to the seller is precluded.
The danger of waiting until it is time to seek investors or sell, is that if you want to maximize the value of the business, it will delay the sale, many times for years.
For a typical $5 mil business, if you can increase the value at deal time by $500,000 then spending 50 hours focusing on the key value drivers is worth $10,000/hour!!
If you are considering looking for investors, restructuring, or selling your business in the next 5-10 years, do you have a plan for maximizing the value of the business for potential investors? If the plan is not written with specific goals, action steps, KRI’s, and measurable outcomes that are reviewed monthly, you don’t have a plan, just a wish.
Do you know the valuation of your company? On at least a monthly basis?
Long before you make the decision to look for investors or sell, you need to prepare for a transaction. Typically that takes 1-2 years of focused effort.
It is not what your business is worth in today’s market that is critical, but what it will be worth in tomorrow’s market.
The operative question is how to maximize the value of your business in the disruptive economic environment we are in. It is not the same as it was previously.
The portfolio of goods and services you offer needs to be positioned to capitalize on the market trends, what buyers are going to value at that point. Improving the valuation means you can’t by definition operate the same way, but need to focus on what you need to become, what needs to be acquired and what needs to be jettisoned.
Look at the market – time the sale to the market more than your convenience – industry trends are critical in making the timing decision to sell.
Developing a Strategic Positioning Plan which identifies the value drivers of the company takes focus and determination. The rewards are increased profitability, growing revenue and a more competitive company, all attractive elements to a purchaser. And a higher valuation.
Whether we can help you strategically position your business for sale is dependent on a number of factor, not the least of which is your motivation and the timing. We work only with select organizations who we believe have the drive and motivation to work with us to develop and implement a Strategic Positioning Plan.