Assess your company risk profile long before trying to sell
When the day comes that you desire to sell your business to a third party, a potential acquirer is going to assess the “risk” of buying your company. The lower the risk the higher the valuation they may place on your company and the opposite of course is true if they perceive higher risk. This risk assessment will include things like what is the likelihood of continued growth and profitability of your company going forward or what is the risk in any customer relationships and/or contracts that you have.
Well in advance of starting the process to sell your business, sit with your board or your advisors and even key members of your leadership team and ask this question. Where might a future acquirer see risk in acquiring our company and how can we use time as our friend to address the area or areas where they might see risk and either eliminate or reduce the risk?
This basic but important question can help you identify steps you could take that will ultimately help increase the value, or worth, that an acquirer will place on your business. And equally important, it might greatly improve the deal structure that the acquirer might propose for acquiring your company. You want to avoid a deal structure that requires you to accept the risk of an earnout as acquirers generally introduce this concept when they want you to share the risk they see in your business going forward.
We help business owners use time as a friend in preparing their business for a future euphoric exit event. Part of this preparation is understanding what risk a future acquirer might perceive in the business and identify needed steps to reduce or eliminate that risk.
