Reflections

Preparing for your future company sale begins with having the right plan

What can businesses learn from the military as it relates to strategic planning? It’s that strategic planning is the military mantra of having situational awareness and operational effectiveness.

Ask yourself these questions:

• Do we have great situational awareness of what is going on inside our four walls?
• Do we have great situational awareness of what is going on outside our four walls?
• Based on this situational awareness, do we have a good plan for operating effectively?

Executives often don’t tackle strategic planning because they don’t know how to…so they put it off. Or they try to tackle it but over-complicate it. Here is an effective broad approach to tackling your company strategic plan:

• 1. Situational Awareness – Assess inside the four walls of your company
  • What is our historical financial performance
  • Where are we strong in the market, where do we have challenges
  • What value does our customer derive in working with us
  • How do we serve our customers uniquely versus the competition
  • Where is our team/organization strong and where do we have challenges
• 2. Situational Awareness – Assess outside the four walls of your company
  • Is our market growing, flat or shrinking
  • What will future economic projections mean for our product/service
  • What is our customers decision criteria in deciding whether to issue us a PO
  • What technologies are impacting our industry and how can we leverage them
  • How might our customer buying behavior be changing in the future
  • What are un/under-served aspects of our market by ourselves and our competition
  • Where could a competitor disrupt us? Where could we disrupt our competition
• 3. Operational Effectiveness – Where do we want to go with our business
  • Where do we want to go long term with our business – what does good look like in the future
  • What does our internal Situational Awareness tell us we should improve upon
  • What does our external Situational Awareness tell us we should improve on
  • What new products or services could we launch
  • What new markets/subsectors should we expand to
  • What changing needs do our customers have, how could we meet these
  • How could we become more productive/efficient in how we fulfill on our product/service

Strategic thinking and planning are the ultimate muscle you want to build at your company. Doing so will help you build something special, something that a future acquirer will pay you a premium for one day. Use time as a friend and begin building this muscle today.

Don’t make this mistake in preparing your business for a future successful sale

Many surveys have been done of retired business executives. A frequent question in these surveys is, “if there is one thing you could turn back time and do differently, what would it be?”

The answer is very often the same. “I would have made certain personnel changes faster.”

When I ran businesses I was trained to look at my employees, especially my key managers, and ask the following:

• Who is holding us back in building the net worth of our company?
• Who is helping us build the net worth of our company?
• Who is supporting those that are building the net worth of our company?

The first group should not be tolerated and a change of some sort MUST be made now. The second group I need to identify so I can reward and retain them. The third group is where a lot of our tactical work gets done so certainly want to work on retaining them. But what I simply cannot let continue, is the first group.

Don’t have this same regret that so many executives before you have had. Think about your employees, especially your key managers in these three categories. Do your future self a favor by building a strong team today and that is a team that is helping you build meaningful company worth, don’t tolerate anyone holding you back.

Think about strategic planning in a new way to build company worth

In previous posts we’ve covered how companies can grow their net worth by building a strong strategic thinking and execution muscle. We refer to doing so as giving a gift to your future self because when you go to sell your business, an acquirer will see the results of what your strategy has built and could make you euphoric with the premium value, or worth, that they place on your business.

But far too many company owners and CEO’s don’t have teams that are strong at strategy, in fact they are mostly tactical. Very good at their product or service and good at supporting their customer but in the long run, this alone doesn’t build an asset that a third party will pay handsomely for. Equally unfortunate, many owners and CEO’s overcomplicate what strategic planning is so they never build an effective muscle in this critical area. Today, we want to give you a more effective way of thinking about your strategic planning.

Strategic planning is filling your gap. Here are the 3 steps:

• 1.) Ask yourself where is my company today?
  • Where are we strong in the market, where are we challenged?
• 2.) Ask yourself where do I want my company to be in the future – and how do I describe what will make me euphoric when you sell your business one day?
  • What outcome do you want your company to deliver for you personally and professionally one day?
• 3.) Ask yourself, in looking at my answer to question #1 and my answer to question #2, what’s causing the gap between the two – in other words, why isn’t your company already at your future desired state?
  • What are the primary gaps that are keeping your company from already being where you want it to take you?
  • Identify what steps, or initiatives, you could work on to eliminate the gaps – what are these steps and in what priority should you address them
  • In looking at the gap(s), do you believe your plan for your company could get you to your future desired state or is your plan not aggressive enough to close the gap(s). If your plan clearly isn’t going to get you where you want to be, what additional strategic steps could you take to close the gap.

We are intentionally over-simplifying strategic planning. But not by very much. Strategic planning is simply the art of knowing where you are, where you want to be and conducting an honest assessment of what’s causing the gap to keep you from getting there. Knowing the gap(s) and their magnitude will help you know today how audacious your plan does or doesn’t have to be.

Give us a call and we can help you take a fresh new look at the strategic planning at your company. Use time as a friend in preparing for your future euphoric exit event and leverage a new approach that could help you with breakthrough strategic thinking and accelerate building the net worth of your company.

Develop a strategic thinking muscle amongst your team to build company worth

The first step in preparing your business for a future successful exit, that will make you euphoric, is to ask yourself this question - Are me and my team thinking and dialoging at a truly strategic level or are we more tactical than we should be?

This question seems obvious and many leaders of private companies would quickly say yes, we are thinking strategically. But don’t answer too quickly. Are you truly discussing challenging near term and long term strategic questions or are you guiding the business using short term, tactical thinking that is based on information and knowledge that could be out of touch with reality.

President and General Dwight Eisenhower once said, “Plans are nothing. Planning is everything.” And more recently Mike Tyson wisely shared, “Everyone has a plan until they get punched in the face.”

The essence of these famous quotes is simply this. The real power of strategic planning is in the thinking, not the act of documenting the plan or planning. The planning aspect is simply the tactical piece that captures your thinking in a document so you can act. I’d be more willing to invest in a business where the team is excellent at thinking strategically and fair at the actual documentation/planning aspect versus a team that is weaker at the strategic thinking but great at documenting/planning their tactical thinking. Planning isn’t what is going to build the worth of your business long term, but strategic thinking can be game-changing to your company future worth.

Here are just a few strategic thinking questions to help you think more deeply about this muscle at your business:Do you clearly know the top 5-7 things a future acquirer will look at your business to see if it possesses and these top things will drive their valuation of your business?Do you clearly know the top 5-7 things a future acquirer will look at your business to see if it possesses and these top things will drive their valuation of your business?

• Do you clearly know the top 5-7 things a future acquirer will look at your business to see if it possesses and these top things will drive their valuation of your business?

• Are you clear on where your company brand and product/service offering are truly positioned in your served market – is your view of this positioning the same perception as your target customer?
• What are the top 5 decision criteria that your target customer thinks through in deciding whether to issue your company a purchase order? Have these criteria changed since COVID and might trends in your industry change them yet again?
• What step could an existing or new competitor take that could disrupt your business?
• What step could your team take that could disrupt your competitors?
• What’s your plan for the period ahead to drive more productivity out of your team/process and improve margins?
• How are specific technologies being applied in your industry and how do you anticipate they will be applied in the next several years to impact your business positively or negatively?
• Of the markets we serve (and want to serve), what is the growth trajectory of each? And what is our unique capability versus competitors that is of value to our target customers?
• What steps could we take to become “stickier” with our customers? Could we build our stickiness either as a result of a uniqueness in our product or service and/or through the customer experience we deliver?

Don’t rush in to planning, which is ultimately just documenting your thinking. Focus on THINKING strategically first. Start by identifying strategic questions you have about your business that your answers need to be refreshed or you realize you don’t have effective answers for. Building the long-term worth of your business doesn’t just happen by luck. If you’re looking to be euphoric one day by a third party paying you handsomely for your company, then start today with building the strategic thinking muscle of yourself and your key managers. Reward your future self by building the gift of strategic thinking today.

Avoid a common mistake when preparing for a company sale

Ask yourself this question – each year when our company does strategic planning, do we build our plan in parallel with building our new budget?

If your answer is yes, please reconsider. The reason is this. Budgeting has natural boundaries built into it and in great strategic thinking and planning, you don’t want to be encumbered by anything that might block the free flow of innovative ideas. Too often, executives go into their strategic planning already having financial boundaries in their heads related to revenue, margin and investment targets. These financial variables then steer the planning and will often squelch any creative thinking and dialog amongst your team. You inhibit members of your team from being confident to raise what if thinking because they already know the constraints that the budget will place on many creative ideas, so why bother bringing the idea up in the first place?

But what if you and your team initially remove the boundaries that a budgeting mindset creates and open up the thinking to include more what ifs? What if you talk with your team about the initial removal of financial boundaries, could this open up healthy new dialog? Could this have you working on new ideas and paths for your business that will provide greater excitement for your future potential acquirer to benefit from and therefore reward you with a premium valuation? Could new thinking help you from getting disrupted by a competitor or even play the role of the disrupter in your market space?

Obviously, the reality of financial constraints (i.e.: how much capital is available for investing in new initiatives) has to ultimately enter the equation. But it shouldn’t impede the initial creative thinking that could generate new ideas that ultimately may not require a lot of capital to execute. Owners that take this approach often find that there are many creative ideas that come forth and ultimately some don’t require the capital investment or risk that they were first concerned about. Wouldn’t you rather discuss the creative ideas and then modify or eliminate the idea if you are financially constrained to deliver on them versus never having discussed the idea in the first place? Don’t forget the adage, one good idea often leads to another.

The business environment continues to change around us. Lead your team to navigate the market opportunities and challenges that your business faces with creative and innovative thinking. This thinking is the first step in doing great strategic planning. Yes, budgeting and financial planning have to enter the discussion, but don’t let it influence the discussion initially. Building this thinking and planning muscle ahead of budgeting will have you on a better path to building the long-term worth of your business.

When you sell your company, the acquirer will look to understand your position in the market and it could impact valuation

As we’ve posted in many blogs, it’s more than just your financials that a future potential acquirer will consider when placing a valuation on your company.  Another non-financial factor they will look to understand is where in the market(s) you serve are you positioned? Where your company is positioned may excite the acquirer or it might concern them as it pertains to where they could take your business in the future.

What is a market position? It’s managing the 4 P’s (Product, Price, Place, Promotion). How your team manages each of these will ultimately position your company in the minds of your customers and you’re looking to have this perception be one that differentiates you from your competition in a positive way.

Here are questions to facilitate your thinking and to discuss with your team:

• Are we intentional about where we position ourselves in our market(s)? (i.e.: are we positioned in the low, mid or high end of our market as it pertains to the 4 P’s)?
• Are we confident that our target customer’s perception of where we are positioned in the market aligns with what we want that position to be? Or as an example do we view our position as serving the high end of the market but the customer perceives us to be in the lower tier of the market in terms of capability or offering or quality, etc?
• Does our market position appear that we are trying to be all things to all customers, or are we managing our market position to serve a target group of customers?
• Every industry and market is separated in to 3 segments; Good, Better and Best product and service offerings – where in your market(s) is your company positioned? And do you know which of these 3 is growing, flat or shrinking and could your future business be impacted by this shift? (i.e.: during good economic times, the Better and Best segments might be growing versus the Good and in down economic times, Best may decline as the buyer/consumer looks to save money moving to the Better or Good.)

Don’t let the market position your company for you. If this occurs then you have to hope it’s being positioned in a positive light. Be intentional about how you and your team manage the 4 P’s so you position your company exactly in the market where you believe it will best stand apart from the competition. Doing so today will pay you great dividends at time of a future exit in the eyes of an acquirer.

Alignment around strategic aspects of your business are crucial to building worth ahead of a future company sale

Ask yourself this question – if I asked my key managers individually the following two questions, would their answers be the same which would show we are aligned or would they be different?

• What is our company overall #1 strategic need –
  • is it we need more revenue?
  • more profit?
  • better fulfillment of our product or service?
  • or to deliver a better customer experience?
• What are the top 3-5 criteria that our customers use in deciding what vendor to select for our type of product/service? In other words, what 3-5 things must we be able to show a customer we offer before they consider doing business with us?

Don’t underestimate the power of having this discussion with your key managers. If key managers on your team view the answers to these questions differently than you do, that lack of alignment could be impeding your company worth building progress. Are they right, are you right? – what a great discussion to have and determination to make to eliminate worth building barriers and help you achieve a better exit one day.

Having the right answer can be important on your path to a euphoric exit

Sellers will many times be in a discussion with a potential acquirer regarding a sale of the business and the question will arise from the acquirer – “so we don’t waste your time, how much are you looking to get for your company?”

On the surface, this seems like a fair question and certainly phrased in a way that shows respect for you. It is however, a loaded question and one most times you do not want to directly answer.

In reality, your business is worth whatever the acquirer believes it’s worth to them. Yes, you might have your idea of what it’s worth but unless the acquirer agrees, there won’t be a deal getting done. So, the first offer should come from them, not you.

The acquirer could in fact be asking simply because they need to understand the general scope of what your valuation thinking is to see if you’re anywhere close to their thinking. However, in many cases they ask this question in the hopes that your answer might undervalue your company. How do you know they don’t see unique value in your business and may in fact be willing to pay you more than you expected but you hurt yourself by throwing out a number.

When dealing with an acquirer, if they ask you what valuation you have in mind, the answer should be “when the time arrives that I sell my business, I’ll let the market determine what the value is. What I believe is moot, it’s what the acquirer’s in the market believe it’s worth.” This is a professional way of saying I’m not going to set the valuation bar for my business, you’ll need to.

The other reason you don’t want to throw a number out first is you’d be doing so most likely without ever sharing the bigger narrative about what your business is, why it’s unique and its future ongoing potential (see our blog post of May 18, 2024 on this topic). Absent conveying this narrative, any valuation discussion is baseless and therefore more likely to hurt you then help you.

Bottom line – if asked this question, be prepared with your professional reply that doesn’t create the opportunity for an acquirer to undervalue what you’ve built. Achieving a euphoric exit one day requires many effective steps to be taken and managing this question is certainly one of them.

Many acquirer's want you to have a strong organization they can leverage

Many sellers believe that their future acquirer will just base their purchase valuation on the financial performance of the business. Certainly, the financials and the projections of same will factor into the valuation the acquirer places on your company. But, there are other factors.

In the M&A world, there is an expression that the acquirer is placing their bet on the jockey more than the horse. Meaning, the product or service your company provides is certainly important but what many acquirer’s are drawn to is how strong is the organization, your team, that they could leverage to drive continued solid performance.

Your employee hiring, retention and overall management plans are key to building the organization that could one day help excite an acquirer. So, ask yourself these questions as they relate to having a strong organization:

• Do we have people in key roles that know how to help us get to the next level of performance or could we soon outgrow their education and experience level?
• Do our key managers have educational and experience backgrounds that fit well with the job they do or do we have people in roles they aren’t specifically suited for?
• Does our company have a healthy culture?
  • Do we empower employees to make certain decisions on their own
  • Do our employees work well together, as a team
  • Do we hold people accountable for doing their jobs consistently around our company or are we inconsistent?
  • Do we promote from within – are we grooming the future group of key managers?
  • Do we have a compensation and reward system that helps drive results?Building the long-term net worth of your business will require multiple pieces of the puzzle to be in place. One is certainly the strength of your product or service and the other is your financial performance and projections. But don’t underestimate your organization and what it will mean to your future acquirer. Start giving more thought today to your team and your culture as time invested in this important area will pay you a dividend many times over in the future.

Building the long-term net worth of your business will require multiple pieces of the puzzle to be in place. One is certainly the strength of your product or service and the other is your financial performance and projections. But don’t underestimate your organization and what it will mean to your future acquirer. Start giving more thought today to your team and your culture as time invested in this important area will pay you a dividend many times over in the future.

If planning to sell your business one day, this muscle is critical to build today

When the day comes that you want to sell your company to a third party, they will ask you to share your strategic plan.  Having a plan to share could help excite the acquirer about the ongoing potential of your company and underpin their making a strong offer to buy your business.

If such a benefit to having a plan can help your business down the road, and certainly today as well, then why do so few companies have an effective strategic plan?

The answer is that the executives leading the company are lacking in knowing, or working, a repeatable, scalable model for developing their plan. Each time they think about developing a strategy they approach it differently and therefore never build a repeatable, scalable muscle in this critical business discipline.

Imagine if every time a golfer teed off, they held the club differently, stood differently, swung differently – the results will rely on luck to stay on the fairway.  Imagine if the field goal kicker in a football game had a different approach to kicking a field goal each time he attempted one – the results will rely on luck to score the points.

It’s the same with building and implementing a strategic plan for a business. It’s a muscle that must be developed over time. And this muscle is only established if the executive adopts a consistent model for developing and implementing a plan. Approach it differently each time and you’ll be relying on luck to achieve results. But select a repeatable model for building your plan, and you will greatly increase the likelihood of achieving your desired end results and not leaving it to chance.

We regularly do guest speaking on the topic of building the strategic planning muscle for companies, give us a call (949.874.0787) so we can share the 4 Part Campaign with you. Use time as a friend in optimizing your company for a future euphoric exit. Building your teams strategic planning muscle will be a key part of building your company net worth.

Accelerate revenue growth to build your company net worth

Preparing to optimize your business for a euphoric company sale one day entails many steps. A key area we work with clients on is building a scalable sales model. But too often we find company owners not giving enough attention to the silent salesperson on their team.

Ask yourself this question – when is the last time we sat together as a team and reviewed/updated the quality and effectiveness of our customer sales proposal document and process? When a customer asks for a price proposal, your team kicks into gear in developing, submitting and following up on that proposal. Once in the hands of your potential customer, the sales proposal is acting as a representative of your company or what we call your silent salesperson. What’s the quality of this representation?

If it’s been a while since you evaluated the effectiveness of your sales proposal process, here is an insightful template (Template for Invigorating Our Sales Proposal Process) for facilitating great questions to discuss with your team. You have visibility on what your sales team is doing, now is a good time to assess the quality of your silent salesperson and any improvements could greatly enable your building of company net worth.

The Sale & Purchase Agreement (SPA) is one to familiarize yourself with before selling

When you sell your business one day, the catch-all legal document that will capture all key aspects of what you and the acquirer have agreed upon will be contained within the Sale & Purchase Agreement or SPA. There will be various types of legal documents that your lawyer and the acquirer’s lawyer will be drawing up but none more important than the SPA.

For a typical transaction, the SPA can run 20+ pages on smaller transactions and grow to over 100 pages for larger deals especially when including all the related schedules that come along with the document. This alone tells you that it will contain a great level of detail about the deal surrounding the sale of your company. There will be many points that get negotiated between you and the buyer besides just the purchase price. There will be many key points to be negotiated and you don’t want these coming as a surprise. Surprises during an exit event mean stress for the seller and can impact your ability to achieve your euphoric exit. So here are just some of the key items you’ll be negotiating with the acquirer for the SPA:

• Will there be any funds held back on the day of the transaction successfully closing and if so, how much and for how long?
• What types of issues can the acquirer come to you post transaction closing and claw money back from you?
• What types of issues will the acquirer ask you to represent your specific knowledge of to eliminate their exposure post transaction closing? e.: your knowledge of potential future loss of a customer or contract, a possible product warranty issue, a possible employee or customer litigation, a possible environmental issue with a facility.
• How will post-closing adjustments be calculated specific to working capital? There will be estimates done for the day the transaction successfully closes with accounts receivables and payables and inventory but there will be a “true-up” months later, how will this be done?
• What are the “conditions to closing” that the acquirer will require you to provide? This will be a listing of all the conditions the acquirer must have you comply with such as ensuring key customer approvals will rollover to them, rollover of key contracts, transferability of facility or equipment leases, employment agreements in place with the seller and/or key employees and several others they may require.
• What indemnifications will the acquirer demand from you and visa versa post transaction?

Too often sellers are surprised by the content of a SPA and they find themselves having to rush their thinking and decisions which only serves to raise their stress levels. Sit with an exit optimization professional and use time as a friend to understand the SPA content and remove the unnecessary surprises that often arise during the sale process.

The gift of a smart pricing strategy can reward you handsomely when selling your business

Ask yourself this question – how do we know whether we are maximizing our pricing in our marketplace to better enable our profitability?

Too few executives leverage this gift with their business. We always share with our clients that the two best gifts you can give your business are a solid pricing strategy and a solid productivity enhancement plan. When the day comes that you want to sell your business, you can excite a potential acquirer by showing them above market margins you are achieving as a result of smart pricing.

It’s a gift because it’s the quickest path to building profitability. And it’s also a gift because in developing your pricing strategy you will greatly enhance the situational awareness of your team in terms of how your company truly stacks up in the marketplace.

Here are some questions to sit with your team and discuss:

• When is the last time we reviewed our price positioning in the market for each of our products and services to understand how we compare to leading competitors?
• For each of our products/services, do we know if we are priced at, below or above our leading competitors?
• When is the last time we reviewed our products/services offered and how they compare feature & benefit wise versus leading competitors? If we have products or services that provide our customers’ greater value than competitors, does our pricing reflect this?
• Have we leveraged our customer sales data to truly understand the impact on sales when we’ve raised or lowered prices in the past?

Don’t miss out on the gift of pricing for your business. Strengthen your pricing strategy and accelerate building your company net worth.

Building customer stickiness is a direct path to building company net worth

When the day arrives that you want to sell your business, the difference between being euphoric with the outcome and disappointed could lie in a single area – customer stickiness.

Customer stickiness is another way of saying customer loyalty. Having customer loyalty leads to your team’s ability to confidently project future growth. The ability to confidently project future profitable growth goes a long way in making your business attractive to potential acquirers.

Sit with your team and discuss steps you could take to build customer stickiness – discuss things like:

• What percentage of our customers purchase two or more products/services from us?
• If we created a bundle of our products or services, would that be more compelling for customers versus them buying our products or services individually?
• Could we offer our customers better pricing or better purchasing terms if in turn they are willing to sign an annual purchase agreement with us? A potentially lower margin could be offset by getting greater visibility to their purchasing requirements which might help our purchasing economies and/or help our production/fulfillment efficiencies. Note, these agreements are viewed positively by future acquirer’s as long as the agreements don’t lock you in to fixed pricing that may impede your future revenue or profit growth with that customer.
• Does our product or service provide us an opportunity to offer our customers a subscription type service and in turn, provide us high visibility to revenues?
• Could we develop (or acquire) a product or service that is truly unique from our competition – putting us in the position of gaining a sole source position with some or all of our customers?

Use time as a friend in building your customer stickiness. With each level of stickiness you build, you’re automatically building the overall worth of your company.

Which of these will enable your company worth

Ask yourself this question – for me to enable building even greater shareholder value, or the net worth of my company, is it our organization culture, our strategic plan or our strategic plan execution that we need to focus on?

We share with business owners, building their company net worth is either occurring because of these three all being aligned and well managed or it’s being impeded by one, two or all three of them. Knowing which for your business is crucial. Step back from your day to day running of the business and assess where you are with these three critical factors. Gaps in any of the three will lead to gaps in your achieving the company net worth you desire for one day getting to your euphoric exit event.

Organization Culture – do you have the right people in the right seats with the right focus for building company worth. Are your people trained and empowered to focus on the customer and do they have a passion for working well together as a unified team in delivering a competitively unique and compelling customer experience?

Strategic Thinking & Planning – does your team have a documented plan as to where you want to take your business? Is your team good at thinking and talking at a strategic level about what markets and customer types you want to serve? The products/services you want to offer and how you will offer them uniquely in bringing value to your customer or client? Hope is not a plan so building a strong strategic thinking and planning muscle within your company is essential to building the company that will one day enable you to command a premium valuation for you at time exit.

Strategic Plan Execution – is your team aligned with you and with each other in terms of what initiatives your plan calls for? And does your team have a good track record of successfully implementing on your plan?

Give the opening question to this post some serious thought about your company. Without delivering on all three of these critical factors you would have to rely on hope and luck to achieve your desired future exit event. But being honest with yourself today and identifying where these three may need improvement is a giant first step in addressing any gaps to you achieving a future euphoric exit event.

Think T.O.P.S. to achieve yours

Achieving a euphoric exit event is obtainable. Many have but unfortunately most don’t.

For those that did achieve theirs, they reached the pinnacle of professional success by selling their company and receiving the desired cash, deal structure and post-sale life they wanted,

And for those that did, they followed the formula and this formula we call T.O.P.S.. Here is an article (read Achieving Your Euphoric Business Exit here) we wrote a couple of years ago and offer it here again because it is so important for owners and CEO’s to have this formula in mind every day.

Don’t lose another day of working the formula and getting you on your way to your future euphoric exit event.

Drafting it early will enable your future euphoric exit

When the day arrives that you desire to sell your business, you will need to assemble various pieces of information that will be used to attract potential buyers. One central piece of information you’ll need is referred to under various names such as a Confidential Information Memorandum (CIM), Management Presentation or Pitch Deck.

The important purpose for this document is that it’s your opportunity to tell your company story, your narrative about what your company mission is, why it’s special, how it’s been performing and forecasting its future potential and overall how it’s a great business for an acquirer to benefit from owning. It’s designed to help you excite an acquirer about what it could mean for them going forward.

In working with our clients, we share samples of these CIM’s/Management Presentations/Pitch Decks and we do this at least a year (more often two years) prior to beginning the exit process. There are multiple benefits for reviewing, even drafting, your document at least a year prior to exiting:

• Will help you begin to see what types of data you’ll need for populating the document and give you time to pull it together if not already readily available.
• Help you begin to draft your narrative about why your company is special and in doing this, it might identify gaps still present that need to be addressed prior to attempting to attract acquirers.
• Will help ensure you are tracking and ready to share key metrics about a company such as yours that a typical acquirer will expect you to be able to present to them. Having required metrics and attractive performance will go a long way in attracting an acquirer to pay a premium value.
• Will help facilitate very healthy and strategic dialog and thinking about your company that will have near term benefit and will also have benefit when you decide it’s truly time to begin the exit process.

Call us (949.874.0787) to schedule a time to show you some sample documents. Reviewing these years ahead of your exit could be very enabling to achieving your future euphoric exit event.

Knowing the difference can help you optimize the future sale of your company

Ask yourself this question about your sales team – when they are speaking with existing and potential customers, are they being interesting or interested? A sales rep trying to be interesting is in sales mode, jumping into conveying what your company has to offer its customer. A sales rep trying to be interested is in listening mode as they ask questions to first understand the customer wants and desires. The most successful sales reps start by being interested and then know when to move to being interesting.

As we help clients prepare for their future euphoric exit event, a common step we take is to help build the capability of the sales team. Doing so very often increases profitable revenues which in turn helps build the long-term net worth of the business. It’s common for us to find that sales personnel are in a comfort zone, almost robotic in explaining what their company does and even how their company is different before ever first looking to listen to understand the true customer needs. The bridge they are missing is first understanding what the customer is looking for in effective detail and then bridging their need to how the company can best meet that need.

Meet with your sales leader and ask the following questions:

• What questions do our salespeople ask when meeting with an existing customer to determine if the customer needs or wants are changing? Don’t assume a customer need or want never changes.
• When meeting with a potential customer, what questions are our salespeople asking to ensure we truly understand their needs and wants? How are we determining if this potential customer could be a good fit with our business? Don’t assume all customers are good customers.
• Are our salespeople asking open-ended questions so we can listen to first understand their needs or are we asking close-ended questions that only elicit a yes or no answer so we don’t learn very much?
• Have we given our salespeople the profile of the type of customer we want to do business with….and those we do not?
• Once our salespeople are interested and learn truly what a customer is looking for, what is the sales pitch they then give to be interesting? Is the pitch conveying why your company is unique or is it a sales pitch any competitor could also be giving?

The bottom line here is understanding the difference between your sales team being interested versus interesting can be meaningful to your long-term profitable sales growth. Don’t assume, meet with your sales leader and members of your sales team and assess whether they are striking the right balance of interested and interesting. If too much interesting and too little interested, with some subtle changes you could meaningfully stimulate the growth trajectory of your company and enable your future euphoric exit.

Hitting revenue and profit projections during due diligence is key

Ask a business broker or investment banker what top headaches can arise during due diligence and they will tell you….if the seller starts missing their revenue and profit projections while the acquirer’s due diligence process is underway, a can of worms will get opened.

Put the glasses of the acquirer on. They receive your financials and a management presentation of some sort that together excite them to make an offer. But during the due diligence process, they ask for current financials for the most recent month and performance shows a miss to your budget or projections you’ve given them. And if this occurs over multiple months of a potential due diligence process, the acquirer has to now question whether they are buying your business with a new, negative trend beginning. This adds time and questions to their due diligence process and brings more stress to the seller as they try to explain the miss.

It's best to only plan for your exit process to occur when you are highly confident that positive performance will continue during the acquirer’s due diligence process. Prior to starting the sale process, sit with your team (sales and finance) and do your best forecasting to either give yourself the confidence that timing to sell could be good as performance is highly likely to continue or if not, modify the timing of your exit. Don’t let your future euphoric exit be negatively affected at the last minute by this issue. Add this preparation step to your effective exit planning, or as we call it, exit optimization.

When selling your business, be ready for a potentially "invasive" due diligence probe

Owners of private companies understand they will have to allow the potential acquirer to conduct due diligence on their business prior to buying it. But, what surprises many is how detailed, even invasive, this due diligence can be. We refer to it as a probe and it’s one that you’ll want to ensure your company is ready to successfully withstand.

We work with our clients in conducting due diligence dress rehearsals at least 1 year prior to beginning the exit process. This dress rehearsal walks through, in detail, all aspects of a business to ensure it’ll be ready to support an acquirer’s due diligence. Here is just a brief snapshot of some of the key areas you’ll need your company to be able to support:

• All legal documents reflecting company ownership are current
• Financial statements are accurate for at least the past 3 years and are reported to your industry norms
• Gross margins at the customer and product/service level are available, not just reported at the consolidated level
• Employee organization chart, compensation & benefits plan documents and employee handbook are all current
• Customer purchase history for at least the past 3 years is accurate
• Vendor purchase history for at least the past 3 years is accurate
• Sales opportunity pipeline reflecting future growth potential is documented and available
• Critical company procedures are well documented – such as work orders, bills of material and standard operating procedures are current.

We offer an online tool for conducting a probe of your business to help you conduct a private due diligence dress rehearsal. Use this link to our diagnostic tool (Yosemite Associates Due Diligence Dress Rehearsal) or call us for help at 949.874.0787.

Don’t wait until you are in the throws of an acquirer’s due diligence to find out you were or weren’t ready for it. Use time as a friend to conduct an effective dress rehearsal and ensure that your future due diligence will go smoothly and support your euphoric exit plans.