Many of you got your start with your business because you saw a need and knew you could fulfill it. But for most, the key first step once you identified the need was to convince a potential client that your offering would meet that need.
Chances are good that before you met with any of your potential clients, before you even attempted to convince someone that your option/product/service was preferable, you spent some time preparing. You made sure that before you sat down with any prospects that your presentation was well thought out, thorough, and detailed.
If you are still involved in sales pitches today, you probably still go through this same process. No matter how many years you have been “selling” your services, preparation is still key.
The same is true when you eventually look for buyers for your business. What amazes us as professional deal makers, though, is that all too often business owners do very little preparation in advance to make their companies “buyer ready.” In reality, we tell business owners, you should be thinking about finding a buyer for your business literally from the day you first start your company.
At this point some of you are probably saying, “Well, wait, my company is profitable and growing. What more do I need to do to make it ready for a buyer?”
I recently sat in on a webinar that was very enlightening on this topic. Although targeted towards high tech ventures, the basic concepts discussed apply to all companies in every industry.
Entitled “Technology M&A: Deal Preparation and Management,” the webinar had applications to companies regardless of their niches. Hosted by virtual data room provider SecureDocs, the first speaker, Christian Bennett, Managing Director of Pagemill Partners, had some really good points regarding deal preparation. He broke his discussion into two parts:
Again, although Mr. Bennett focused on these two key areas in relation to software and high tech offerings, the reality is no matter what your company’s industry, both of these are likewise important to you. And both are equally vital.
External readiness is ensuring that your business is viable long term, especially under new ownership. This means reducing customer concentration (any client generating more than 10% of your revenue will raise red flags with buyers). It also is vital to sign long-term contracts with suppliers and customers to ensure a stable flow of business. Finally make sure that your company’s brand is well developed and your strategic growth plans are documented.
Keep in mind that buyers hate risk; the more you can do far in advance of selling to reduce your business’ perceived risk, the better your chances of finding and closing a deal with a buyer.
Internal readiness, as the name implies, is taking steps early in your company’s development to ensure that the company is not thoroughly and completely dependent upon you. Create a middle-management team, for example. Delegate key decisions to them. Groom your replacement. Make sure that your accounting system/software is the best available (within your budget, of course) so that you can document your profit margins and other key financial metrics. Buyers have significantly more confidence in a target that can quickly and accurately document its finances!
These are just a few basic examples of what you can do both externally and internally to prep your business for buyer scrutiny. If you would like to learn more, please feel free to access our library of whitepapers. These are complimentary to you and are written with one goal in mind: helping business owners prepare their companies for buyers.
No matter what, keep this in mind: The odds of you finding a buyer willing and able to pay you top dollar for your company improve dramatically if you take the time and put in the effort in advance to make your company “buyer ready.” The question is: Do you know what to do, the steps to take, to make this happen? Learn as much as you can in advance because unless you can think like a buyer, you may have no idea how to externally and internally prepare your company for the market.
Carl Doerksen is the Director of Corporate Development at Generational Equity.
© 2013 Generational Equity, LLC All Rights Reserved
The help you provided us during each step of this process made us feel very comfortable and confident we were selecting the right approach to transition our Company.Andy Graham, Vice President, Modern Heating & Plumbing
The process was much more involved than I expected and your help, experience and advice was a big factor in making the negotiations go as smoothly as possible.Terry D. Wickman, President, Keytroller
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.Ralph Noblin, President of Noblin & Associates
Greetings Mike. Thank you for the captivating and compelling presentation you made at the Phoenix presentation last week. Over many years in business yours was the most informative and well-presented presentation, on any subject, that I have ever attended! Your energy and enthusiasm combined with your concise and captivating support of your positions with easily understood examples and data was compelling.Pete L.
Michael worked tirelessly, He followed every lead meticulously and urgently to make sure nothing was missed.Robert Evans, President and CEO of Mealtracker Dietary Software
We will highly recommend Generational Equity and Musa Jagne to any business owner about to embark on the same process.Karen S. Williams, CFO, BW Manufacturing
I must say that I have never worked with a more driven, competent and focused individual as Don Ho.Jay Dinnison, Owner of Sharpe Mixers
I couldn’t have asked for a better team than Michael and Deborah. We couldn’t have done it without them.Robert Evans, President and CEO of Mealtracker Dietary Software
Generational Equity’s assistance was invaluable in compiling and marketing our business.Bil MacLeslie, CEO, ipHouse
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.Bil MacLeslie, CEO, ipHouse
I quickly recognized that Don was working for Sharpe Mixers above all else, and held our interests above others.Jay Dinnison, Owner of Sharpe Mixers
We thank you Eric and Generational Equity making our dream come true.Larry Moore, Owner, A Company Portable Restrooms
I wanted to write you a quick letter to express our appreciation and our delight on the outcome of helping us through the process of our recent sale. We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Terry D. Wickman, President, Keytroller
Thanks again Phil and feel free to have a future client call me if they would like a referral. You are a true professional!Andy Graham, Vice President, Modern Heating & Plumbing
We are extremely pleased with the way Generational Equity handled the sale of our company. Your associates, Tom and Chris, did an outstanding job of getting us (me) through the process.Michael J Polarek, President, Paragon Packaging
We knew it would be a difficult task to have someone really understand our business and our market, prior to researching a possible buyer, so it was imperative that we found someone of your caliber, with definite proven experience in this area.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).Bil MacLeslie, CEO, ipHouse
Tom Staszak is one of the most professional people I have dealt with in my last forty years of business. You’ve got a great group of people and you have built a truly professional organization.Michael J Polarek, President, Paragon Packaging
Bruce and I wanted to take this opportunity to thank Generational Equity for assigning Musa Jagne to our transaction. In Bruce’s words, “Musa did one hell of a job for us!”Karen S. Williams, CFO, BW Manufacturing
We were happy to see the interest in our company and what we cherished has not just a valuable company but an important company to the communities we served in.Larry Moore, Owner, A Company Portable Restrooms
Thank you again for all your guidance and support. Any company will achieve what they intend, if they have you on their team!Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
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