The Path Forward

Utilizing a proven roadmap, an activity-based strategic plan and industry peer relationships are vital keys to sales readiness. We cannot overemphasize the importance of being adequately prepared to sell your life’s work. Preparation is about owning a transferable asset.

Preparation always beats planning. The most important component of your business’s preparation, in our opinion, is crafting and delivering a clear path forward. Strategically providing a clear, concise and compelling message to buyers will be the difference between your business selling, selling at a premium or not selling at all. It’s your choice – we can show you how- and what to do once you’re through the door, but you have to open it.

The amount of preparation you perform towards turning your life’s work into a transferable asset is equal to the quality of your outcome. Planning is based on the expectation of order. Preparation is based on the expectation of chaos. Through nearly 100 transactions, 100% of our clients surveyed said they had no idea how difficult the process would be and would have heeded our guidance in being more prepared.

If you don’t prepare, then you’re signaling to the universe of buyers there’s no clear path forward. What happens then? Your effort reduces the number of buyers, the buyers you do have in play lose interest or worse, walk away. The best business cases, and transactions, are built on momentum and compromising preparation reduces the competitive friction necessary to achieve the best financial outcome for you. When you don’t prepare, buyers will look at your case and think, ‘what am I supposed to do with this?’ The worst case is the business doesn’t trade.

Time. It’s your most valuable commodity. How long does it take? You can perform a 60-day sprint. Your business is likely your single greatest asset. How wise is it to shortcut the investment of time for something so important? When there’s a defined plan, a built-out management team or a succession plan of development, a well-articulated story of what the future can look like will accelerate the process.

Unfortunately, most aren’t prepared, and many delegate the entire process to the investment banker. At JSP, it’s a mutual collection of effort – we know what works and what doesn’t. Find a process and follow the process. When you focus on the strategic story and find your voice – the strength of the business, the untapped potential, how it’s realized with a well thought out well-crafted plan with well-articulated tactics, those drivers anyone can see, feel and touch backed up by data and analytics deliver credibility.

Your Story is the substantive business drilled to a level of depth for buyer’s reassurance to validate with consent, research, data and analytics gives them confidence the opportunity is real. What we’ve found vital is having you and the team build out an activity-based plan with specific projects, tactics backed by research, data and analytics. While the seven work streams of seller due diligence are very important, crafting a clear, concise and compelling story of the path forward articulating why, how, and what it takes to deliver the untapped value, the initial priorities accelerating growth substantiate your plan.

Painting the picture of what can be done when the business is free from owner constraints is what will energize buyers and have them set your case above dozens of others. A high-quality well-crafted story delivering meat-on-the-bone answers to the questions financial buyers and strategics will have about your path forward minimizes the risk profile of your case, setting you up for a potential premium exit.

We had one seller who skipped this critical step, and the dialog became a back-and-forth time drag between buyer and seller. Egos got in the way; emotions began to negatively affect the relationships, cutting a 7X multiple in half. Rule #1 don’t be an ass; be humble, and rule #2 take advice and counsel of those who’ve gone before you.

Preparation. Another head scratcher buyers often tell us is many businesses at every revenue level don’t know where they’re going. Preparation is about being predictive; at the very least it’s proactive. Ill prepared sellers are reacting daily, weekly, monthly to internal and external factors versus executing to a well thought out well-crafted plan that 90-95% of the employee population understands, embraces, or is aware of. Your plan isn’t some 200-page leather bound portfolio sitting on a shelf collecting dust. It’s a living, breathing collection of strategies, tactics and conversations up, down and across the organization in a culture that thrives on achievement; one who overcomes adversity because the leaders have prepared the employees for when shit hits the fan so it’s not a surprise. They have tactics sitting on the bench ready to deploy for ‘if-then’ situations.

The frustrating response we hear from buyers at the negotiating table is when they say, ‘you don’t know where you’re headed…I don’t want to have to do this for you…I’m going to go with an opportunity that gets it, that’s investable now because you’re not ready!’ The difference between trading and not trading is your plan can be quantified or it cannot. Capital is volatile, expensive. The world has a level of uncertainty and time is scarce. Give the buyers confidence in the plan, confidence in the team, confidence you can lead without creating new risks.

The Last Line. We encourage all our clients to seriously consider rollover equity, and the numbers bear it out; the second bite of the apple can be considerably larger than the first. An often-overlooked dimension of a seller’s exit is the transition. From Day One, a carefully crafted plan of moving from point A to B in concert with oversight and support from your buyer – now your employer – is building the bridge while you walk on it. This validated TSA (transition services agreement) between you and your employer puts NewCo on the road to success.

Do you think if the buyer inserts a professional management team, develops your businesses product array, manufacturing capabilities and expands the geographical footprint the business will grow 2X, 3X or more? Chances are they will. What they can’t do is insert a CEO or GM on Day One. They’re not ‘sitting on the bench’ somewhere, and financial buyers aren’t operators. So, they need you for at least one year. And you’re the bridge between buyer and your employees.

At JSP, we’re here to assist you in developing and stress testing your exit and transit transition plan. You’ll give the buyers a brief history of you and more importantly the path forward about the team and the opportunity for them to shine. The TSA is about minimizing your ego with a humble presence and giving space or oxygen for your team – it’s not about your decision making. Now’s the time to edify the team.

Common problems you’ll face in the exit and transition are timing. Have you stood up a team well enough or are they lacking leadership and accountability, experiential or situational leadership, are there wide gaps or gaps left unfilled? Have you identified a #2 or #3 to succeed you? You need to tell the story of a “bright future” with new leadership on the horizon.

Operational and scalability issues must be addressed involving partners, suppliers, and customers where you’re not spinning teams (this is product, distribution and commercial rationalizations). Be transparent as there are profound differences for financial buyers investing in your business versus strategic buyers. Keep repeating the narrative of a clear path forward. When the President gets elected it’s not about convincing voters to vote for them. It’s about repeating the narrative that fills a need in the voter to stimulate action. Keep messaging a clear path forward in a volatile world and the buyers will pay you that premium exit…the conversation continues…