It is likely that you will find yourself thinking about the sale of your company after years or decades of building your business from the ground up. Whether you have a well-defined exit plan and strategy or are taking a “winging it” approach when it comes to preparing for sale, you must be able to view your company from the buyer’s eye. Are you ready?
Understand Value Drivers of the Business
The value drivers are the qualities and characteristics of your business that prospective buyers will be most interested in learning more about. For example, begin to assess and get prepared to answer several questions from interested parties in your business including:
- Is there a history of consistent growth? If not, why? What are the drivers for consistent growth?
- What opportunities exist to grow the business? If you had additional capital to invest, where would it be allocated?
- Is your company a part of a growing sector? What are the drivers of the sector?
- Are you increasing your share of the market? If not, what needs to happen to order to increase share?
- What are the barriers to competition? And, have you created them? If not, why not? When do you plan on creating the barriers?
- Are any of your customers or suppliers contractually committed? Do you have a customer concentration issue? How do you diversify your customer list?
- What is your competitive differentiation? Why are you so special? Are any of your products or services unique and provide you with a competitive advantage?
- What is your brand equity? Do you have a recognizable brand?
- Is your company innovative or “generic” and commoditized? Do you have intellectual property to drive further value and create barriers to entry?
- What are your operating and contribution margins? How do they compare to industry standard versus your peers?
- What is your payor mix? Cash or third-party reimbursement?
- Are you using best practices for accounting, financial matters, and compliance? What non- related business expenses are being run through the business?
- Is the company dependent on your involvement and presence? What is your succession plan to create sustainability?
- How do you track key measures for success or key performance indicators (KPI’s)? How do you compare year over year?
- Do you have the right people on the bus sitting in the right seats moving forward? Is the leadership team skilled and succeeding in meeting or exceeding goals and objectives?
- Does the company have the ability to attract, develop, and retain quality employees?
- Are the company’s legal matters in order? Where are the skeletons?
What are You Doing to Address the Gaps?
If you intend to sell your company in the near future or within the next two years, the time to address any gaps, perceived or real, is now. There is no need to wait. Do it now as addressing any deficiencies will take time and you don’t want to delay the process. The flip side of the coin is that any deficiencies that exist will likely be discovered in the due diligence process and may cause the buyers to either walk or offer lower than expected market terms.
It is currently a seller’s market and buyers of many sizes and shapes exist that are eagerly seeking ways to acquire good companies and create investor value. You only have one chance to make a good impression to buyers, similar to the analogy of only having one opportunity to launch a product. Will your first impression lead to a successful sale at the price you want and in the time frame you desire, or will it leave you with long-term regrets on Monday following the sale, or not, of the company? Invest time today to significantly influence the reward you get back in return.
If you are looking to explore opportunities for the sale of your company, our firm is happy to assist in assessing your timing and determining where any gaps exist. Contact me at (858) 461-9490 or email me directly to [email protected].
About the Author:
David H. Crean, Ph.D, MBA
Managing Director, Life Sciences & Healthcare
25+ Years of Experience
Objective Capital Partners is a leading investment banking advisory firm whose Principals have collectively engaged in more than 500 successful transactions serving the transaction needs of growth stage and mid-size companies. The executive team has a unique combination of investment banking, private equity, and business ownership experience that enables Objective Capital Partners to provide large enterprise caliber investment banking services to companies with annual revenues up to $500MM. Services include sale transactions, partnering/ licensing, equity and debt capital raises, valuation and comprehensive advisory services. The firm uses a proprietary process to work to achieve maximum company valuation, premium pricing, and high client satisfaction rates post-sale. The firm’s industry expertise is focused on 5 verticals including healthcare, life sciences, business services, technology, and consumer products. Additional information on Objective Capital Partners is available at www.objectiveibv.com.
This article is provided for informational purposes only and does not constitute an offer, invitation or recommendation to buy, sell, subscribe for or issue any securities. Securities and investment banking services are offered through BA Securities, LLC Member FINRA, SIPC. Objective Capital Partners and BA Securities are separate and unaffiliated entities. While the information provided herein is believed to be accurate and reliable, Objective Capital Partners and BA Securities, LLC makes no representations or warranties, expressed or implied, as to the accuracy or completeness of such information. All information contained herein is preliminary, limited and subject to completion, correction or amendment. It should not be construed as investment, legal, or tax advice and may not be reproduced or distributed to any person.