Wearing future acquirer glasses might help you build your company value
This week a client called to discuss a new piece of capital equipment his team was considering. He wanted my input on whether making a 6 figure investment would help build his company's future value. After a brief overview of the equipment and how he was thinking about the return on investment he might realize, I shared that he was doing a great job of evaluating the investment opportunity through his pair of glasses. But then we switched to wearing the pair of glasses that his most likely future acquirer would be wearing. And although this particular client is still 3 to 4 years away from exiting, we are preparing now to ensure he has a euphoric exit outcome and making this investment decision required we factor this future exit event heavily in to our thinking. We pulled out the prior prepared list we have of his most likely potential acquirer's. In looking at this, it was clear that this particular piece of capital equipment was one each of these potential acquirer's had plenty of at their existing facilities. This then could mean they wouldn't see value creation in this particular piece of equipment so this client wouldn't be rewarded for the investment unless of course it helped generate revenue and margin that he wasn't generating today. This then led to a discussion about alternative production paths the client could take that would allow him to capture the new business growth but eliminate the need for the large capital outlay. And sure enough, his team came up with an idea that would work.
This is an example of something I frequently recommend to clients. When considering important business decisions about new facilities, new equipment, hiring of new executives, etc, etc, after you've thought about the decision through your glasses, put on the glasses of those that might one day consider investing in or acquiring your business. How will they view the investment you made years earlier and will it help further excite them about your business and therefore help build your company value? Always have both pairs of glasses in your pocket, knowing when to wear both can help you on your journey of one day being euphoric at time of selling your business.
