Exit Readiness is not the same as owning a Saleable Company

Read on to understand the difference.

Bad news first

Most companies that attempt to sell or ‘go to market’ don’t sell. How do we know? The number of companies that sell each quarter has stayed steady since 2008. In Canada. In the US.

Lots of cash looking to buy. Even more buyers entering the market today than ever before.

Yet… even though there are many successful businesses available to buyer, the deals don’t get done.

Why?

Buyers are searching for investments that solve their growth problem.

If they don’t find what they need, they are not negotiating with the seller to buy at a lower price. They are just saying No Deal.

You can’t negotiate your way into a sale.

A Saleable Business Attracts Buyers

What makes a business saleable?

First understand what does NOT make a business attractive to a buyer.

• Your exit plan.
• Your succession plan.
• Your revenue growth.

What does attract buyers?

A company that has many of the following attributes already built into the business is attracts buyers.

• A management team responsible for today’s growth.
• An owner that has already taken a backseat to the management team.
• A highly visible business in a narrow niche market where your offering is in demand.
• Gross margin and profit margin above comparable average and improving.
• Steady and growing cash flow.
• Ready for the next level of growth by doing more for the target markets that see your business and the way you serve as indispensable.
• Knowledge about how the business operates and makes and loses money easily transferrable to the next owner.

Do You Want ROI From Your Business?

Intention is everything.

Ask yourself why you want to grow your business. What’s the purpose, the end game, the motivation to do what you do?

Think about the value of owning a stock. Why do you buy stocks?

You want the value of the stock to go up. But until you sell that stock, the only value you ‘own’ is on paper, not in your bank account.

Until you sell, you haven’t earned a return on that investment.

A business is not automatically an asset you can sell. You have to grow transferrable enterprise value. In the meantime, it is lifestyle business – successful for you, but not an asset someone would want to acquire.

Building a Saleable Asset

Decide ROI is important at least 2-3 years before you want to sell.

In fact, if you want the highest probability of ROI, make sure your business is always saleable because:

• Your ideal buyer is looking when it make sense to them, not your time line.
• A saleable business delivers better returns today, to you, the current investor.

Take the time to make an informed decision about how you want to make it saleable.

Our Decision Road Map helps you determine what your company’s value today and whether it’s worth turning it into a saleable enterprise. There are a lot of moving parts to making this commitment, so you want to be sure the path you take works for you and your situation.

You decide how much more is important for family, financial security, legacy and return.

We measure the valuation gap between enterprise value today and your goals.

Then we zero in on your risk tolerance.

Building a saleable business means you will be making changes to add those saleable features.

Managing change is a challenge. It stretches comfort zones. And can feel risky. Like entrusting your management team to make decisions you are more comfortable making yourself.

We determine your likely ideal buyer developing a strong thesis for what they would find important in their next acquisition.

And re-visit your risk tolerance to become what your ideal buyer is searching for.

Then we map the critical path of priorities and the financial model to close your valuation gap.

It takes a minimum of two years to close the valuation gap and be perceived by buyers as the ideal acquisition.

Why, all buyers look for trends, evidence growth is occurring and the right people are responsible for that growth. Two years is the shortest time period to reveal a trend.

If ROI is important to you, don’t put becoming Saleable on the back burner.

Now you know why so few companies sell.

Too many owners put off becoming exit ready and saleable until life presents them with no other option. By then it’s too late.

Start the conversation to build your Decision Road Map. Then you can make an informed decision.