Posts tagged with: buyer ready
“Attracting a buyer is like preparing for a beauty contest” – Gary Miller
Dog owners and breeders know that it takes years of discipline, training and preparation for their pure bred champion dog to stand out from the crowd and win the blue ribbon at the Westminster Kennel Club dog show. They know that the dog that ‘shows best’ will win ‘first’. They know the decision is in the judge’s hands.
To show best and win first in selling your business, it’s up to you to make your business both buyer ready and buyer attractive.
To Prepare Your Business, Think Like a Buyer
Before you enter the market place of potential buyers, preparation is essential not optional. Plan on at least 1-2 years of preparation efforts before you begin the 6-9 month transaction process. Yes, years. This preparation means all the difference in the value of your business and the price it will command in the market place.
Preparation is a choice far too few owners take seriously. Preparation makes your business stronger, more attractive and more valuable. Without preparation, you give (gift) all the leverage in a negotiation to the buyer and the buyer’s intermediary.
To think like a buyer, there are a few key steps that will make your business more attractive and appealing to potential buyers. They include:
- Getting a base-line valuation performed by an independent valuation firm to quantify the current market value of the business.
- Documenting all assets and inventory accurately. Dispose of any obsolete materials or expired inventory to get to a true accounting of what you have.
- Cleaning up all financial records to show current market value of assets and inventory now to avoid any issue for your buyer. If you wait until you have an interested buyer and they discover that your financial records show a higher value than market value at that late date, it will weaken your negotiating position or worse, put the deal itself at risk.
- Investing in an audit of your financials now, done by an independent accounting firm. This will give you time to clean up/correct any errors or concerns identified. It also establishes a pattern of good business management.
- Bringing all legal requirements and records up to date. Revisit all vendor and client contracts before you pursue any buyer opportunity.
- Implementing and document all systems and processes for operating your business. If you’ve never documented anything, you have no leverage to say what it’s worth. If the entire business is in your head, a buyer will not pay the full potential value of your business if they have to depend on you to achieve it. This step in itself adds value to the bottom line and drastically reduces business continuity risk.
- Deciding now who on your management team will be essential to the successful transition of the business to new ownership. Tell them your plans now and what you’ll do for them because they help you through the transaction process. Without them, your business is much less attractive to your buyer. You need them on board to champion the business when your potential buyer arrives to do their due diligence.
- Executing your own internal due diligence now to identify what is ready, what is not ready, where you are strong and where there are holes in what a buyer would expect to find in the due diligence process. With a timeline of years, you give yourself the luxury to methodically clean up, resolve and eliminate any potential red flag. The more complete, transparent and prepared you are, the less likely the buyer’s team are to dig for hidden problems.
Your All-Star Team of Advisors
To prepare you, your business, and your team to take your business to market, you need an all-star team of advisors, not just one or two. The most successful transactions close when you surround yourself with a cooperating, collaborating coordinated team of advisors to ensure your business is buyer ready and buyer attractive to achieve the outcome you want on your terms. In addition to your current business attorney and accountant, your core team must include at least:
- An exit strategist to manage the preparation of your business for you and orchestrate your transaction team; so you can stay focused on what you do best – accelerating growth and maximizing the value of your business.
- An attorney with significant transaction experience in the type of transaction you want to close. A divorce attorney or real estate attorney or a litigation attorney may not have the experience to give you the leverage to negotiate the best deal.
- Your Chief Financial Officer – even if you’ve never had a CFO on your team in the past. Even a part-time CFO will help position your business in the best light for a buyer.
- An investment banker with substantial transaction experience in your industry can be invaluable in negotiating the deal and moving the process to closure.
- A tax accountant experienced in major transactions who can evaluate and guide you to minimize the tax impact of the deal by preparing years in advance.
- A specialist wealth advisor to help establish your wealth preservation plan beyond the business, long before that plan will be funded by a successful sale to your buyer.
You need the entire team, not full-time, but all on board early and engaged to advise you through the preparation stage and right through the transaction to your ideal buyer.
Select the best advisors you can find, not the cheapest. The best, who deliver the most value, will pay for themselves many times over in the returns you receive.
Think like a buyer. When you and your team analyze your business through the eye of your ideal buyer, over time, you will add value and increase the leverage you can command in the deal. That’s how you attract the best buyers, “show best” and “win first”.
It’s devastating. Ninety-five percent of all businesses never achieve their goals for the business and beyond, not to mention the long-term financial expectations for their families. This 95% statistic is widely accepted as an unchangeable fact and “the risk of doing business.”
I can’t understand why it is still the accepted norm. Just like you confront and address every other risk you face in business, why not illuminate this gap, address it and fix it. I want to help you minimize the risk and overcome this statistical barrier to your success, to fulfill your dreams.
The core causes of this problem have been around since you launched your business. The solutions aren’t easy but they are so inexpensive that you can afford to implement every one and still stay within your budget. The key is, that we must reveals the flaws of businesses today and owners’ biggest self-imposed barriers.
The solution I present is a system that builds a strong foundation for your business, whether:
- You are just starting out, or you’ve been in business a while
- You have a team or no team
- You have revenues less than $100K or more than $10M
- You are on a fast-track to be acquired or want to cash out to pursue your reinvention
When you systematize your entire enterprise for long-term results, it will transform your business and your life. You will gain time, control, freedom and flexibility all while the business prospers, grows and breaks through to achieve new heights of success you didn’t dare dream of – until now. Everything you do to accelerate growth and maximize value makes the business more buyer ready and buyer attractive.
If you are in business delivering product, content or services, then you have a few options to grow your business exponentially. Simplistically, your choices are to:
- increase the number of clients
- increase the volume you sell/client
- increase prices
- decrease costs
- or a combination of these four
When you take action to build a sale-able business, you join the 5% who successfully complete the transaction and transition to their reinvention.
This Way Out Group LLC announces the release of HARVEST YOUR WEALTH – Exit Essentials for Your Business by exit strategist, author, speaker, and radio host, Kerri Salls to help business owners cash out of their business so they can cash in on their future.
FRAMINGHAM, MA (January 21, 2013) – This Way Out Group (http://thiswayoutgroup.com), the break-out boutique services firm providing comprehensive collaborative exit planning services announced today the release of HARVEST YOUR WEALTH – Exit Essentials for Your Business (This Way Out Press $17.97 on Amazon) by CEO and author, Kerri Salls. HARVEST YOUR WEALTH – Exit Essentials for Your Business educates and prepares business owners to monetize their business on their terms when they plan to get out, instead of simply shuttering the business and walking away. Only when an owner prepares the business for a clean, solid, and profitable exit can they expect to cash out of the business to cash in on their future. Written by expert exit strategist Kerri Salls, HARVEST YOUR WEALTH reveals the secrets the transaction experts want entrepreneurs to know before selling a business, but no one has been telling them until now.
In HARVEST YOUR WEALTH, Salls introduces the 95% of all entrepreneurs and owners who do not have an exit plan for their business to the decisions, choices, options and opportunities they need to know about years before they decide to get out of their business. She advocates for early exits, especially over the next five years for baby boomers.
Salls says, “HARVEST YOUR WEALTH gives the owner/entrepreneur more control and leverage getting out. Plenty has been written on starting and growing a company. Very little has been written on exits, on monetizing that investment to be able to get out. What has been written has focused on the financial and legal side of the exit transaction or from the advisor or the buyer’s perspective.”
Less than 10% of business owners who put their companies up for sale actually get the deal done. (2010 Survey of Brokers and Buyers by MidMarket Capital) “[Exiting small business] owners are preparing for the deal of a lifetime with possibly zero experience.” (MorganStanley SmithBarney publication, 2011) [via Blackbridge Newsletter 2011]
They think they’ll be able to sell when they want for what they want with no lead-time or preparation of the business, the team or the business owner. That’s a diet of hope and promises that will satisfy no one. Because of a lack of pre-planning, 95% of all business owners are leaving up to 50% of the value of their business on the table when they exit.
In this book, Salls focuses on the needs of owners to make their business buyer ready and buyer attractive; on exit planning from the seller’s perspective before the transaction experts, or the buyers come into the picture. The urgency for baby boomers to act now cannot be overstated.
HARVEST YOUR WEALTH provides steps, checklists, assessments, questions and exercises all business owners must consider in order to take control and achieve their goals in the business and beyond. Salls provides the resources, tools and insight to encourage entrepreneurs and business owners to, as she says, “Plan their exit from the outset.”
Salls started her career in the Peace Corps in West Africa and then spent a decade accumulating multi-million dollar corporate achievements before launching her first business in 1988. She has been active in business strategy and exit planning for 40 years.
This Way Out Group LLC [http://thiswayoutgroup.com] has been refining and applying a holistic system to assist business owners since 1999 specifically to help owners transform an income generating business into a wealth-producing machine so they can sell or scale the business on their terms on their timeline. Partnering with the business owner 2-5 years before their expected exit, we help established and hyper-growth companies prepare for and achieve their optimum exit strategy. We help owners to accelerate sales, optimize growth, and maximize value to make their business buyer ready and buyer attractive so they can get out and move on to the next venture, adventure or avocation.
HARVEST YOUR WEALTH – Exit Essentials for Your Business is available at Amazon and other outlets or at www.harvest-your-wealth.com.
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We’ve gone through a long list of experts.
I hear you saying:
“But Kerri, I’ve never needed all these people before, why do I need them now, when I’m getting ready to get out of business?”
It’s a normal knee-jerk reaction to resist bringing so many people to the table. You need this full team of experts now to:
- Build a strong deep foundation
- Accelerate growth
- Protect all intellectual property
- Get all governance up to date and compliant
- Get the books meticulously clean ready for an audit and due diligence
- Maximize valuation
- Get all your financial advisors: your accountants, tax advisor, estate attorney and wealth advisor, on the same page – early
- Expand exit options
- Ensure the business is buyer ready
- Transition your role from operational to strategic demonstrating that the value is in the business, not you
- Prepare you, your team, your family for your exit
- Prepare you and your family for your reinvention
- Document and codify every system, strategy, process and procedure in the business.
It does cost money to exit well, but it does not cost more money.The return on your investment in your team is much greater too, when you bring a full team to the table.
The cost to you, your legacy and your family will be compounded and the possible returns reduced, if you abdicate and don’t act now.
When you surround yourself with experts to support the process, your business will be stronger, demonstrate appealing growth projections, will have a higher valuation than otherwise possible, and become buyer attractive.
As a result, you can and will be able to exit your business by intention on your terms instead of closing the doors with no monetary gain by default.
Quick, simple and cheap will shortchange you when selling a business.
Are You Ready To Sell Your Business?
Is Your Business Ready To Be Sold?
Are you ready to sell your business? Is your business ready to be sold?
These are not the same question although the answers must be consistent.
Have you thought about the former but assumed the latter to be true?
Are you prepared to let go of your business, to get out now? Physically? Logistically? Financially? Emotionally? That’s a series of discussions right there that you must address before you can sell your company. Those are questions you will address as your team, your broker and your family ask them.
But What About The Business Itself?
What have you done to make the business buyer ready or buyer attractive?
What have you done to prepare the business not just you for this transition? You’re transitioning to your next adventure, venture or avocation. Your business will transition to new ownership in a financial or strategic sale. These transitions can be easy or very tough.
Exit transitions for you the owner can be easy when you have a detailed plan for your next adventure, avocation or indeed a new business – something to look forward to, something to plan for on your terms. Your exit transition can be tough when you ignore what comes next, leave your reinvention as a black hole that will magically fill itself in or don’t communicate with the most important people in your life about how this transition will impact them.
For the business itself, these same issues arise. Allowing the business and your team to transition smoothly and successfully to new ownership is your responsibility. Indeed, that successful smooth transfer is a key to the value a buyer will pay for. To make the business transition easy, you must prepare the business to be an attractive asset for the buyer. In the next post, we’ll list eight questions to consider to ensure an easy and profitable sale when you exit the business.
When your intention is raised to the level of a commitment to accelerate growth, maximize value in the business and make that business buyer ready; at that point, every task, goal and objectives must be tied to those clear specific objectives. It’s essential to make those objectives your priorities to make your business buyer attractive.
To Stay Focused On Your Priorities
Here are 5 simple ways to stay focused but they only work when you make these rules into habits you live by every day.
- Always tie your daily task list to your goals. If your daily tasks are not helping you develop your exit plan and bringing you closer to your transition, they are keeping you from it
- Be sure the first task you tackle each day moves you closer to achieving your biggest goals. Your biggest goals should be what helps you get out when you want to.
- Delegate what does not have to be done by you.
- Focus on what’s important to eliminate crises. Crises take you off your game to address another need on the critical path or on someone else’s priority list.
- Set time limits for every task on your list:
- to ensure you complete every task on your list
- to stay highly productive using your time wisely on every task you take on
There’s a very compatible synergy between priorities and productivity. Cultivate this kind of co-dependence and you’ll get more done.
To streamline and optimize your business for maximum value, you need to think strategically and keep an eye on every facet of the business, the team and your personal goals and objectives. No one can do all that alone. It’s never too early to build your team of exit advisors.
The best advisors are proactive, open-minded and client focused. Before you commit to any advisor being on your exit team, specifically focused on your exit objectives and timeline, it’s up to you to qualify them to be part of this specific initiative. You need a full complement of advisors, not just your accountant and attorney when you prepare to get out of your business and move on to your own reinvention.
You need the full team of experts on board now to:
- Build a strong deep foundation to strategically grow the business.
- Accelerate growth to achieve your specified goals and objectives for the business.
- Protect all intellectual property – to have all patents, trademarks and copyrights secure and complete well before you want to get out, making them easy to identify and monetize.
- Get all governance up to date and compliant – That includes minutes, resolutions, and annual meetings being recorded, complete and up to date.
- Get the financial books meticulously clean – This goes far beyond balancing the books and paying taxes. It can take 2-3 years to achieve clean books ready for review or audit.
- Maximize valuation – your advisors will help keep this goal in mind at every milestone and strategic decision to ensure goals and investments are always tied to increasing the value of the business.
- Expand exit options – the earlier you start and with a full complement of advisors, you have more exit options to choose from because you have the lead-time to explore them before you decide how and when to get out.
- Ensure the business is buyer ready – your advisors will help you become a strategic CEO with the team in place to run operations independent of your daily presence. This is the easiest way to be buyer ready and buyer attractive, and demonstrate that the value of the business is in the business, not in your head.
- Get your accountants, tax advisor, estate attorney and wealth advisor on the same page. Do this early to expand your wealth preservation options to serve your reinvention goals, objectives and legacy. They can do a better job of achieving your goals when they are on board early and can implement tactics pro-actively for your future plans.
- Document and codify every system, strategy, process and procedure in the business. This one simple discipline adds value every day. It’s also one of the biggest ways that owners lose value in negotiations with buyers because they ‘never get around to it’.
- Give you greater leverage in negotiations with potential buyers. When your team of exit advisors has been working together building your business into a wealth-producing machine over time, you are in a stronger negotiating position with potential buyers.
When you surround yourself with a range of experts to support the exit process over the next 2-5 years, your business will be stronger, demonstrate appealing growth projections, will have a higher valuation than otherwise possible, and become buyer attractive. As a result, you can and will be able to exit your business by intention on your terms instead of closing the doors with no monetary gain by default.
If I were to ask you, as the CEO/owner of a thriving enterprise, ‘Are you expendable?’, what would your answer be? The automatic knee-jerk reaction is ‘Of course not. I’m the CEO. I’m indispensible to the organization.’
But, in fact, in business, that’s the wrong answer! Indeed, you, wearing your CEO hat, want to become expendable. You want to be planning for your exit from the outset, from the very beginning.
To achieve your goal of being an ultra-successful entrepreneur, becoming expendable must be part of your exit strategy.
Your big payday, when you get to cash out on your business, is when you exit (e.g., when someone else buys your business). If you are still indispensible to running the business; if all the intellectual property, goodwill and value of the business is tied up in you; the business is not buyer ready. If the business is not buyer ready, your big payday is still just a hope and a dream.
Once you decide to exit the business, one of your primary tasks is to transition day-to-day operations and transfer that responsibility to your team. To increase the value in the business, to ensure that value can be monetized you, as a successful entrepreneur, must make yourself replaceable therefore expendable.
Failure to shift responsibilities and remove yourself from any operational role is a big mistake that exiting CEOs struggle with. It’s emotional, it’s strategic, and it’s tactical.
Just as you didn’t build the company or grow the company overnight, you can’t disengage from daily operations overnight. You can’t go from being indispensible working long hours, to being expendable overnight. These pieces of your exit strategy take time. They take time to plan and implement – likely years before you exit successfully.
To see if you are ready to develop your exit strategy and/or help you plan your exit on your terms, on your timeline, request a free assessment here.
Working in a vacuum, the assumption is that Exit Strategies Are Difficult.
Most CEOS assume exit strategies are difficult. That assumption discourages anyone who is considering an exit from getting started early.
As the CEO of your growing enterprise, it’s easy to be so consumed with the day-to-day operations of the business, that you never find time to think about your exit strategy (knowing it is going to be difficult). So naturally, it simply gets shuffled to the bottom of your TODO list and never rises to the critical path until it’s too late.
You can minimize how difficult your exit is by being proactive, starting early and committing to the bigger plan to achieve your ultimate goal. As a discerning entrepreneur, you know your business is your largest asset that you need to monetize if you are going to secure your reinvention (fka retirement).
Exit planning requires numerous conversations and then an integration of solutions in all the following areas:
- Peak performance
- Succession planning
- Contingency and continuity planning for management and leadership transition
- Business valuation strategies to make the business buyer attractive and buyer ready
- Transition planning to your reinvention (fka retirement)
- Tax planning for both the business and the CEO
- Estate planning goals and options from wealth advisors and insurance advisors
- Deal structure options both legally and financially
Your exit strategy will be specific to you, your business, your timeline and your goals.
- There is no ‘cookie-cutter’ approach.
- It doesn’t happen overnight.
The difficulty in exit strategies comes from the multitude of possibilities and recombinations you have to explore and choose from. That’s also where the fun and freedom come from.