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Common Mistake Impacting Exit Valuation

But a mistake than can be avoided

A business owner reached out recently saying he was considering exiting in the coming months. As he shared an overview of his business, I asked what the compelling message would be to a potential acquirer as to why his business would be attractive to them? The response was, “My business is growing and has good, loyal customers”.

I offered my congratulations on achieving this point with his business and then asked if during the due diligence process that a future acquirer would take his company through, would his data support the compelling message about his business?

The reason I asked this question is it’s not that difficult to get potential acquirers willing to at least listen to learn more about your business. And a seller can provide an interesting, compelling message about their business that could get an acquirer to say they want to learn more as they might consider acquiring the business. But as they ask for data about your business to place a valuation on it, will the historical and recent trends back up the initial message shared with them?

In this particular case of, “my business is growing and has good, loyal customers”, here are examples of data that you’d want to be ready to provide to back up this message:

  • What is your revenue trend of the past 36 months, steady increase or is it choppy
  • What is the revenue trend of your top 10, 20 or 50 customers
  • Related to the revenue growth, can you show solid gross margins
  • Do you have visibility to what your customers will be purchasing from you so you can show a reliable future forecast
  • What is the Trailing 12 month trend of your revenues and margins, by your major product or service offerings
  • What is your customer attrition and can you show customers have been with you for many years
  • Can you show that a meaningful number of customers purchase multiple products or services from you

These are just a few examples of specific data points you’d need to have ready to back up the initial message about your business. As you think about the compelling message you may want to deliver one day for your business to a potential acquirer, think now about how to ensure you’re building the data to back it up. Doing so can help you attract an optimal exit valuation for your business and sustain it through the due diligence process.

Use Greenpoint Testing to Achieve Your Desired Exit Valuation

It only takes 106 questions, scanning 10 essential business functions, to stress test your readiness for a successful exit.

However, these questions require thoughtful commitment to achieve your desired exit valuation.

During this up to hour-long online testing, you'll see questions such as the following.

Sample Question 02

After internalizing each question, select among three answer options – Agree, Unsure and Don’t Agree – choosing the answer which best describes you and your business.

Then, complete the Greenpoint questionnaire to unlock your personalized report, which will reveal any gaps in your planning, pointing to the action steps needed to maximize your desired exit valuation.

Format: Digital

Delivery method: Email

Report included: Your Greenpoint results