Exit preparation includes having effective narrative around each
We share with new clients that a successfully run business today doesn’t necessarily mean an exit ready business tomorrow. The reason for this is many private business owners believe that if they have good revenue and profit the potential acquirers will line up outside their door. They may in fact line up with interest to acquire your company, but to open their checkbooks and pay you a premium for your company will take much more than just historical revenue and profits. There are several other areas you’ll need to be prepared to excite them to get them to pay a premium. In addition, here are 3 critical questions the potential acquirer will ask and you’ll want to be well prepared with effective answers:
- Why are you selling now? They aren’t asking to be kind or to warm up the conversation. They are asking because they truly want to understand your motivation to ensure it doesn’t include things like you believe your company has reached its peak or you see a potential issue brewing within your industry or your company and you are concerned there could be challenging times ahead. They also want to ensure that you’ve fully thought through the idea of selling so they don’t waste their time applying their resources to the process only to have you change your mind.
- Why is your company unique versus competitive alternatives? Make sure you have positioned your business, well in advance of selling it, to be able to exhibit and articulate a unique position in the industry. Whether the uniqueness is in the product or service itself or the intellectual property you own or how you fulfill on providing your product or service to your customers, be prepared to articulate this clearly. Don’t assume the potential acquirer will know why your business is special.
- What is the future outlook for your business? Acquirer’s will want to know that under their ownership, your business will flourish in a way that enables their company. An acquirer isn’t going to pay you a premium for your historical performance as they will assume you’ve already rewarded yourself for that. But they will pay a premium for a business with a proven successful track record and good visibility to future positive performance. Ensure that years prior to attempting to sell, you build a good sales opportunity pipeline for your business. And build a discipline in using the pipeline to track opportunities you have visibility to, the associated potential revenues that might be attained and even win/loss rates as you've pursued the opportunities.
There are certainly many questions you’ll be asked by a future acquirer. These 3 are main staples so you’ll want to ensure you are well prepared to articulate effective answers. Doing so can be the difference between selling your company and selling your company and being euphoric with the outcome.
