You have spent a lifetime building your business. The journey has been a labor of love. Why did you succeed when others failed? Most likely because you understood the customer’s problem or need, and you created a product or service which solved the problem or fulfilled the need better than others. You built something that had long-term value and a set of customers that trust you and that built a relationship with your team.
Now it’s time to showcase your company to prospective buyers as you view an exit as appropriate in the near term. You plan to help with a successful transition to a new owner who has plans to take your company to an even higher level with additional capital and resources.
How do you start?
As with any process, you need to create a plan and execute it. It is important to be realistic and to start months ahead to position your business to maximize its value in a sale process.
Whether you are bootstrapped or venture backed, you need to prepare your business for an orderly and efficient sale process to highlight your strengths and showcase your expertise. You will have to show buyers that there is a long runway ahead with or without you in the future.
Buyers are willing to pay more for well-run businesses. Take a careful look at your business:
- Analyze the last 3 years of your business activities:
- Revenue growth trends
- Customer patterns, including customer concentration – an area of intense scrutiny by buyers
- EBITDA levels and growth
- Expense infrastructure – by key category: Sales, Marketing, G&A, Operations
- Overall payroll
- Employee turnover – double digit trends are generally bad
- Be sure your receivables are current and collected
- Evaluate sales cycles and backlog
- Review sales pipeline and conversion rates.
- Create a business plan for the current year – detailed and future 3 years at a high level.
- Review key elements of the business and ensure documentation is on hand:
- Highlight mid-management talent to delegate key responsibilities to and which form a basis for expansion with additional capital or acquisitions
- Secure necessary IP protections, if applicable
- Delineate real barriers to entry
- Evaluate or secure long-term customer contracts
- Update competitive analyses of your key competitors
- Ensure your sales and marketing materials are impressive and continue to showcase your business in its best light.
- Understand how customers perceive you – are you critical to them going forward?
- Be able to demonstrate how well positioned you and your team are in the industry: articles written, customer testimonials on your website, be engaged in social media outreach campaigns (LinkedIn, Facebook, Twitter, YouTube).
- Make sure your financial and legal matters will face scrutiny:
- Legal documents up to date, including any employment agreements, and incentive or option plans for key employees
- Break out all personal assets, expenses and debts to segregate them from the business going forward
- Identify specific one-time expenses (add-backs to EBITDA)
- Have your financial statements audited or at a minimum, reviewed by a professional CPA firm.
Be Ready for The M&A Journey
Organization and readiness is paramount; it can set you apart from other companies. Hiring a professional advisor when you are ready to embark on a sale process will also provide you with a trusted advisor to shepherd you through a detailed and broad sales process. They will work closely with your tax, legal and accounting advisors and enable you to continue to run the business during the 6-9 month timeline it takes to get an M&A event complete.
The most important element for you as the owner is to continue to run your business smoothly, efficiently, and profitably during the process. If you’re ready, organized and prepared, your Advisors will take it from there and guide you to a successful exit, maximizing your value.
Want to learm more about the M&A process and what you need to do? Contact SiVal Advisors to discuss how ready you are.