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Think like a buyer when you are selling your business

By Generational Equity

Think like a buyer when selling

One of the significant services that Generational Equity, part of the Generational Group, provides to its clients is the ability to help the business owner look at his/her business through the lenses of potential buyers. For many this is a hard, painful concept to fathom because, as one client told me a few years ago, “No one likes to be told their baby is ugly and needs improvements.”

But just like your doctor, we tell you the tough news so you can then analyze your company as a buyer would and anticipate, create, and implement strategies to address their possible concerns. The great news is that thinking like a buyer and improving your business does not have to be rocket science and in many cases strategies do not have to be fully implemented in order to address buyers’ concerns. For lots of folks, just being on the path is what matters to a buyer because most realize that the final outcome, the goal, is an ongoing path that continues for perpetuity.

How do you begin to think like a buyer and objectively review your business? The first step is to realize one basic fact: Professional buyers of businesses (the kind of buyers you want to attract by the way) are wary of risk!

Now of course the acquisition of any privately held company will carry with it a certain element of risk and unknowns. By the very nature of the way our economy operates, the secrecy and confidentiality that encompass privately held entities is both a strength and a weakness. The positive is that prying eyes can’t see the inner workings of what makes your company unique; the negative is that you have to then convince a skeptical buyer that your business is indeed successful and explain why.

Having said that, as we have discussed before, buyers are most interested in one primary area: the stability of your company’s future earnings.

The more you can do to give a buyer confidence in this key area, the better off you will be when sitting down with him/her during negotiations and due diligence. This is a vital concept because far too often entrepreneurs focus on top line, revenue growth, at the expense of profit margins, and this is key area that buyers examine quite closely.

Important Profitability Tests

For example, one of the first questions we discuss with our clients is their profit margins by product line. We do this because we need to determine if the business is buying growth with key customers at the expense of margins. To many business owners, this analysis is eye-opening because often they learn that the key client they have been working with for years and generating revenue growth from has been maintained by sacrificing the bottom line.

This is just one example of the type of analysis a buyer will do on your earnings because, again, they need to ensure stability of income going forward.

Another example: How many of you compare your profit margins to industry norms? This is an analysis that most professional buyers will do since they have access to research tools that allow them to make this comparison. Again this is a key part of the standard business valuation that Generational Equity does on all of its clients because industry ratio comparison can be indicative of quality of earnings.

These are just two of the tests professional buyers will use when looking at your future earnings strength. Time and space do not allow me to fully explore all the others. If you want to learn more, I suggest attending a Generational Equity M&A seminar. These are highly educational and are designed to help you start to review and analyze your company as a buyer would. If you are planning to exit sometime in the next five years, I recommend attending one soon. Carl Doerksen is the Director of Corporate Development at Generational Equity.

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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
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.
I need to say an immense thank you to Don Ho for his stellar work ethic, attention to detail, and tireless effort. Also thank you to the whole crew at GE! Without you, Don could not do such a phenomenal job. We were shooting for closing and funding before the end of 2020, due to the uncertainty of the political landscape and taxes. I am happy to report we closed last week and will be funding tomorrow.
Dr. Caty J. Catron PhD, RN, VA-BC – Owner, Vic The Picc, LLC
I am pleased that I was able to work with Andrew Byrd throughout this experience. From the first meeting we had in Minneapolis I felt that I was in good hands. His knowledge and expertise is second to none. He guided the process consistently throughout. I feel lucky that I was pared with Andrew and could not be happier that I chose Generational Equity to handle this major life event. Thank you Andrew and GenEq for everything!
Eric Erlandson, Owner, Action Fastenings, Inc.
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
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
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.
Ralph Noblin, President of Noblin & Associates
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
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
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.
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).
Bil MacLeslie, CEO, ipHouse
T.D., thank you so much! You are a great leader! I love how you are using your gifts and talents to better others. You are clearly a GREAT COACH! This 3 day session undoubtedly changed the future of our business, and very well may have been the sole catalyst to save my company, my health and my marriage! A genuine “thank you” from the bottom of my heart.
Bryan D. Horn, Owner, Over Under Clothing
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
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
Generational Equity’s assistance was invaluable in compiling and marketing our business.
Bil MacLeslie, CEO, ipHouse
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
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.
Bil MacLeslie, CEO, ipHouse
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.
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.
We thank you Eric and Generational Equity making our dream come true.
Larry Moore, Owner, A Company Portable Restrooms
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
Dear Chris and Andre, I just wanted to say thanks for all your help. Even though this process was not an easy one, it was comforting to know that I had a capable team standing beside me. You made me feel like we were almost your only client or at least the most important one. Thanks again, and I will recommend your service in the future.
Shenille Engelhart, Owner – CLS Technology
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
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
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