As the years click by, you’ve considered ‘what’s next for me?’ With so much at stake, you have to make the most of your sale opportunity! You’ve poured decades into ‘your baby’ sacrificing a lot to get where you are today. We remember how it felt when we went through the same thing. You know selling your business will be a complex, stressful and time-sucking process. The question is, who will have my back and who’s the best one who can:
Get me the best offer possible!
Our #1 job is to get you that best possible offer at a great value and sale structure. We also create competitive friction from prospective buyers to achieve that best offer, and we provide a secure and confidential process producing the results you must have! It’s critical for you to look beyond the monetary value of your business to what those proceeds provide for you, your family and your employees. If you only focus on maximizing to the last dollar, you will eventually be disappointed.
Some of you will pass your legacy down to a family member or to an employee. Some of you will take your assets, shut the doors and disappear into the sunset. Some of you will plan a careful exit that provides for you and future generations, and some of you will exit not on your terms. That eventuality is about deciding and planning, finding a process and following a process. Regardless, whether you consider JScott Partners as your exit advisor or not, you will exit your business one day. We’ve combined a simple, practical and powerful process on planning for a successful exit to consider. Here are some of the elements:
Exit on Your Terms. Planning a successful exit doesn’t begin on the day an owner decides to sell. Coming to grips with ‘why sell’ and ‘why sell now’ includes several personal and professional factors. How do you arrive at a conclusion? It takes some time to assess and evaluate ‘where I am today’ and ‘where I want to be in…’ whatever that time frame is to you. If your takeaway is merely answering why exit, how do I exit and what life looks like after an exit, you will have accomplished more than 25 million businesspeople like you*.
What’s the Motivation Behind NOW? Ask where you are today and where you want, need or must go? Do you have a plan? How’s your execution to the plan? If you don’t have a plan, then what’s holding you back from getting a plan together? What obstacles are you facing in your plan? Maybe you’ve haven’t considered what your personal and professional goals need to be. How are those plans shaping your business and the path to an eventual sale?
We often hear, “I’d like to hang in there 5 more years.” Ok, define what ‘hang in there means’ – operating, owning, dealing with, what? And how does that answer prepare you for an outcome? Knowing what matters most to you ahead of time will drive the path forward to the strategy and tactics to get you there.
Do you want to retire and stop working completely?
Do you want to stay and work in a different capacity, with less equity risk on the table?
At some point, you need to make the actual decision to sell your business. At this stage, we are impartial sounding boards here at JSP. We want you to consider what you personally want from the exit before entertaining any strategic conversation. A complimentary confidential conversation provides feedback you need to guide your decision making. The context uncovers what the buyer universe wants to see from a business like yours so you can align that POV with your goals and get from point A to point B.
Assess Where You Are Today. Conduct a thorough business assessment, including financial performance, market position, and growth potential. This will help identify areas that need strengthening before the business sale. You may have to fine tune your business or make some adjustments based on the goals you set. After gathering this data, pinpoint potential gaps and pitfalls, and address those issues upfront. Take steps to improve the business’s financial performance and make it more attractive to potential buyers. These steps can include reducing debt, increasing revenue, diversifying customer base and improving operational efficiency.
Preparing Your Business. You have worked hard to grow your business, and you should be awarded the valuation you deserve. Make the process easier by planning early and working with an M&A advisory who can guide you through the process with unbiased expertise ensuring you a successful sale. When you put yourself in a potential buyer’s shoes, you’ll see your business with fresh eyes.
We help you prepare your business for sale from their point of view. We often speak about a humble mindset, and with that being honest with yourself when examining your business. From this perspective, identify any weaknesses or challenges that may need to be addressed or framed in a particular way, which may include looking at your financials with a fresh, unbiased eye. It helps prepare you for any questions and concerns and gives you the opportunity to fix issues before they are brought up by a potential investor or buyer.
Framing Your Business. You want your business to be looked at by buyers as the most attractive opportunity. Consider how you will frame your business and craft a story on its future potential without you. This step is quite challenging for most owners, which is why having someone who understands what the buyer is looking for delivers great value for your business case. You’re the expert of your business and you deeply understand its nuances. Potential buyers do not have the same intel as you, and they will be looking at specific metrics. Some buyers and investors may miss important insights that aren’t immediately obvious, resulting in a lower valuation. This intel is where framing comes in.
Having you optimally frame your business to highlight specific data and trends will avoid the chance of misinterpretation. For example, a large percentage of your customers may be low-value and have a high churn rate. A potential buyer may look at your customer retention rate, find it low, and offer a lower valuation or excuse themselves altogether. Remember, most buyers are financial heads and not operators. In that case, we may want to separate your low-value and high-value customers and show that your high-value customers have a high retention rate. This positioning changes the way an investor perceives your business, provides the full story, and prevents misinterpretation of data.
Increasing Value Before A Sale. Part of preparing your business for sale is maximizing its value before putting it on the market. Take steps now to optimize your current revenue and profits and increase your company’s value to sell at a higher price. It’s not uncommon for entrepreneurs to hide the business’ warts hoping the sale will go through before anyone can notice. Investors and PEGs do this for a living as we do. We know what’s not being said or avoided. Never give a potential buyer an impression of something sketchy. The results can be lower valuations, lost sales or worse.
Let’s focus, however, on areas to drive growth and reduce actions that don’t generate satisfactory profits. We’ll obtain data on potential opportunities to increase revenue and focus areas on improving product, service and customer retention. We will discuss unessential costs which may include entertainment, memberships, subscriptions, conference attendance fees, etc. relative to the value returned. Holding back or reducing some of these expenses in the year leading up to going in market may increase your company’s value.
Succession Development. It is essential to consider, understand and implement how the business will continue to operate profitably without you there. Proper succession execution shows potential investors your business’s value will continue to rise in the future, even when you are gone. Now is the time ahead of selling your life’s work to reduce dependency on you. Putting key people in place, documenting processes and systems properly, and developing the next level of leaders ensures your key people know how to lead and operate the business keeping it profitable without you.
Implementing a documented plan of execution towards a goal provides extra confidence to a potential buyer and will increase your company’s valuation. When you’re removed from being the answer-man and the go-to decision maker, you’re demonstrating to potential buyers they don’t have to go hire a $200,000/year operator and waste a year getting them up to speed. We’ll add back that investment into your valuation as you’ve made the buyer that amount and more.
The Dream Team. Next, we bring in your skill players – Legal Counsel, Tax Guidance, Accounting Expertise, Wealth Advisor and other advisors as required. Preparing your business for sale is made easier with the help of an advisory team. An M&A advisory like JScott Partners guides you throughout the entire process of selling your business, from preparation to closing the deal. We bring an extensive national network of potential buyers, investors and strategics to help you maximize your valuation and find the right buyer for your business.
M&A Advisor. Your first hire needs to be an advisory, a Quarterback, conductor or Master of Ceremonies. Someone who leads and directs other advisors to your goal – a successful sale! Whether you choose us or not, waiting until the last minute to hire M&A advisors will cost you millions – that’s not self-serving either. Lay the groundwork early with a team that knows and owns the process to guide your business to a successful sale without any unpleasant surprises along the way. A strong advisory team will help you identify potential risks early on, clean up any financial and legal issues, and advise you on which best next steps to take to secure the highest valuation and ultimately untapped wealth for you and your family.
Legal documentation will be a major part of your business case making legal counsel mandatory. This choice is not your brother-in-law, college roommate because you like them choice. A good lawyer with merger and acquisition experience, preferably in your industry will minimize the risks associated with the value or proceeds you receive.
Financial experts will work through pre-, during and the post-sales process. They ensure your tax structures and balance sheet are up to standards and expectations for buyers. They confirm the information conveyed outside the purchase price reflects your true intentions.
Wealth Advisor. Your business is likely your largest investment, and selling it is a major financial decision. Having a wealth management or estate plan is crucial for ensuring reinvestment of your wealth. Since you’ve decided to take some chips off the table, making the most of the sweat equity you’ve worked for is crucial for life’s next chapter.
It’s Your Story. Putting your story together that resonates with potential buyers says they’re missing out if they don’t pursue your business as part of their investment future. The numbers bear it out. VPs, Managing Directors and Analysts look at hundreds of potential opportunities every month. They generally pull books (pitchbooks or CIMs) from maybe 8 and will dig into 2-3 potential deals. They’re not operators. They’re financial experts looking for 30% or greater IRR for their investor partners. That’s over a thousand potential deals a year. What do you think will make yours stand out above the crowd?
You must make your business stand out amongst competitors with a clear, concise and compelling story clearly demonstrating why your business is THE most valuable. We will make time for your business story together so you can share it confidently. Consider why your business has been successful thus far, and why it will continue to grow and, most importantly, be more successful in the future. Give your potential buyer the evidence they need to offer a higher valuation with confidence.
Like most business owners, you’ve been focused on day-to-day operations. Many owners and peers of yours have their identity or self-worth tied to their life’s work. A successful exit requires shifting your mindset to value – namely, thinking like a buyer rather than the customer audience you’re used to working with. Once you commit to a process, the front-end preparation involves having the right messaging, story, and strategic positioning to resonate with the broader set of buyers. Our #1 job is to get you the highest price possible and our commitment to you is to link up and help you nail and polish your story angle.
Overcome Adversity. There will be obstacles and impediments during a process. We accelerate the process by discussing these matters early to strategize in overcoming them. We said it before, and we’ll reiterate it again. We demonstrate and expect honesty, openness, and transparency from the very start. Tell us sooner rather than later of any issues so we fully grasp the situation and can preemptively address it strategically. Being surprised, either positively or negatively, typically impacts the success or the expected probability of your closing your sale.
What’s Really at Stake For You?
Final Thoughts. When planning a business sale strategy, no two business cases are the same and no two sales structures are the same. This process is a journey; there will be ups and downs, there will be mistakes made and there will be wins for you. With proper preparation, the right team around you and the proper mindset, your path to closing will uncover trapped wealth in your business leading to a successful conclusion and a new chapter for you, your family and your employees!
To truly understand if you’re ready for a sales process, you need clarity. And there is simply no substitute for sitting down with people who know how to listen and offer valuable insights in helping you craft a plan that is unique to you.
At JScott Partners, we are M&A process specialists, and we know what it takes for buyers to recognize your business as the most attractive opportunity and to want your business now. While the names and faces are always changing, the process and the disciplines remain the same. We understand the push and pull you’re going through as we went through it too. What we found out is there’s a significant gap between buyers and sellers, and we stand in the gap to provide sound advice for you to have a smooth transition creating generational wealth for you and your family. Invite Founder and Managing Partner, Scott Spector to have a complimentary, confidential conversation and take away valuable insights for you to achieve your goals and objectives.