You birthed your business from $1 to $10MM, $15MM or $100MM. It’s been your life’s work, your sweat equity filled with sacrifices. You’re considering taking some chips off the table. When you sit down to that table, your mindset must change from owner to seller. What does my transferrable asset look like today?

There’s multidimensional factors needing a different POV from operator to seller. The seven workstreams are given tickets to play to have a successful sale as every potential buyer wants your businesses for its future. The factors outside your office underpin the bridge between today’s life work and tomorrows transferrable asset. We are taking lessons learned from a number of robust multiple transactions making them applicable to business owners of any size to benefit from. We’re also taking a look at what leads a client to start a sales process. We want to:

Encourage you to be in a position of sale readiness

Be ready and not caught flat footed

Be predictive, or at least a confident proactive position

 

What brings clients to our doorstep? It’s invariably some external factor that becomes the tipping point creating a reaction from the business owner. For some it’s a planned retirement, health issues arise, changes in family dynamics – spousal separation or divorce, unforeseen pressures in the industry pushing you to consider a growth strategy or to risk becoming obsolete, an unsuccessful or undesired 2nd or 3rd generation or an unsolicited offer that flies over the transom. Informing and educating business owners now to help, guide and influence well before their planned exit window opens in critical.

We’re often asked what percentage of clients are fully prepared to sell? The answer is 0. No one in four decades that engaged us has been fully prepared. The answer to your next question 44% of clients we’ve represented have been somewhat prepared (that’s 56% who were poorly prepared). It’s no exaggeration. Y’all could be doing something! Sadly many are either unaware, lack bandwidth, support or are too tired to take full advantage of the opportunity in front of them. At JSP, we want to guide you on how-to build a bridge while you walk on it! Here are the three complimentary critical components for an owner to deploy now creating a sale readiness posture for a transferrable asset:

#1 Have A Roadmap for what an ideal exit must be for you! It includes a documented plan of succession and exit for the businesses leadership to continue after the owner’s involvement tiers out or steps away post transaction. From any level of execution, it could be handing over the reins to a qualified individual or team; it could be several candidates you’re mentoring and developing to be your successor. Any buyer with an appetite for your business is looking to understand what your plan is and where you are in the plan’s timeline.

The Acid Test is go on an extended vacation. If your business would fall apart in two weeks or two months, then you’re no where near ready and need the support we bring to bear on your behalf. When a business is 30-50% or more reliable on your presence and expertise, then there’s very little transferrable value in the business today. We’re not selling anything here other than you need an executable plan. Grow smart to sell smart is investing in your plan for a successful exit.

#2 Have a Strategic Plan and it’s not a 200-page leather bound diatribe collecting dust on a shelf. It can be very complex, or it can be very basic. The point is to have an executable plan to go from point A to point B. There are three simple, practical components to this plan:

12+12 Plan. This annual plan is what you will do in the coming 12 months, and what you’d like to do with the business over the following 12 months. Being well versed as you talk to potential buyers about your plan is important as they’re outsiders to your business lacking the intimate knowledge and insight you have. 

The previous or current 12 months creates an opinion about the believability or validity to where they think your business is going. Buyers are more focused on the future than they are in the past. They want to know what’s going to happen in the next 12 months more, because that’s when their ownership will kick in. They’re not underestimating strong historical performance, but ultimately if you had the best year ever last year that’s less important to a buyer than what’s going to happen next year.

Track and Monitor the results against your plan. What gets measured gets done; know where you are so you know where to go. This stage allows you to course correct based on any internal or external factors with mitigating or contingent strategies ready to deploy. This level of sophistication demonstrates you are ready for any surprises and can communicate the same to potential buyers.

Accountability. Get a partner. Whether that’s a mentor, executive coach, or a business advisor an outside audience to be a sounding board for you to report out ‘how it’s going’. This vital stage is the ‘what’s working’ and ‘what’s not working’ step and having a dialog into filling the gap. Employing strategies to overcome potential or existing obstacles will lead you to successful execution of your plan.

The shared level of knowledge and shared learning from these conversations are vital pieces to becoming adequately prepared for a successful sale. The national averages for SMB that are “adequately prepared” is less than 60% according to M&A Source, 2022. There’s a level of accountability here and most importantly, it gives you the necessary practice repetition of explaining your business at a level of sophistication a potential buyer will want to hear as you go through a sales process. Practice makes improvement!

#3 Peer Recommendation. We encourage business owners to step outside their comfort zone and establish industry relationships increasing visibility in their industry outside of their dominant market. We know most of you are very uncomfortable in making this simple call. Start planting seeds by farming contacts within your industry as they become very valuable down the road. Connecting with them in an introductory way – a high-level – to establish a relationship with them; make a friend and tell them you’d like to learn more about what made their business a success. We all like our ego stroked, and when you come from a position of learning, your request will be appreciated and valued. 

Who is well respected in your industry? 

Who’s at a revenue or unit level greater than yours that’s aligned with your values?

Why is #3 so important? Scroll ahead a few years of developing this relationship when a sales process rolls around.  When we or your advisor makes that phone call to your industry-peer-friend, imagine the direction the call can go in: “I’m so glad you called I’ve been tracking Dave’s business for years ever since he reached out to me…it seems like a really exciting company…I’ve seen where he’s grown over the last few years…I can’t wait to have this conversation” versus “Dave? Who? I’ve never heard of him…I don’t know anything.” There’s no rule anywhere that you can only have one of these… just saying!

If trade shows are important in your industry, grab a cocktail with the corporate development guy at a company in your industry. They’re not running a business unit and your meet’n greet has nothing to do with the business that’s competing with you. The conversation can uncover a ton more insight than press releases, annual reports and investor presentations. Learn about what they’re doing, what they’re looking for. He’s going to tell you where they’re headed at a high level, the types of companies they’re looking for, and the one’s they prefer to work with. Your role is at a high level…here’s how we stack up against [you], we think we do this or that a bit better, we know you guys have a really strong area here, etc. The best relationships are where you, the business owner starts, to pick up on what buyers are looking for. You will likely gain some insights into creating a business a buyer would pay a premium for them, because they told you what they’re looking for.

We’re going to dive deeper into each component in the follow up articles…the conversation continues…