Monitor your company revenue at a granular level
When the day comes that you present your company to a third party for possible acquisition, they will of course review your financial statements. A subsequent request they will make is to see your revenue reported at a granular, or line-item level. Not being able to provide your revenue at a more detailed level could frustrate them and could give them a risk concern of not fully being able to understand your business and therefore this could impact that valuation they place on your business. And if this occurs, this will impact your company and personal net worth.
Let’s presume at time of exit that your overall business revenue has been growing year over year and you have strong growth projections into the future. This alone may help draw a potential acquirer to consider buying your business but until they see the revenue detail, they might not be willing to pay a premium. Despite the consolidated revenue growing, they will want to see the details to see whether all your products and/or services are contributing to the growth or whether you have a situation where those growing are offsetting a concerning decline in others. In other words, your acquirer will want to see a complete picture of your revenues.
This practice of tracking, reporting and monitoring your revenue at a granular level is not just a good practice for supporting your future company worth but it’s also a great practice for today and helping you build worth. Ensure you and your team have the complete picture of your revenue performance, not just a consolidated view. And realize that when the day comes to exit, you’ll want to show the potential acquirer at least 2 to 3 years of this revenue detail so you should ensure you begin this accurate tracking now.
If selling one day to a third party is something you’re considering, this detailed revenue tracking is one of several steps you’ll want to ensure you’re taking now so that when you present your company for sale, you don’t just attract acquirer interest, you excite them and give them reason to reward you with a euphoric exit event.
