When selling your business one day, getting a great valuation from a third party doesn't just happen on its own
We meet with a lot of company owners/CEO’s and as you might expect they are very strong in their technical skills and tactical thinking but could and should improve in their strategic thinking. Here is a good set of strategic questions to consider for your business and in addressing some or all of them, you’ll be building the worth of your company:
- Are investment dollars entering our industry or leaving it? If entering, who are the players coming in and what specifically does it look like they are placing value on? If dollars are leaving, are you learning why and what implication this could have on your business long term worth?
- Am I clear on the top things a future acquirer will one day look for when they kick the tires of my company (i.e.: my financial scale, offering uniqueness, predictability of revenue, backlog, strength of my team, particular customer segments we serve, etc)
- Is the strategy I’m engaging to grow my company audacious enough for closing the gap between what my business is worth today to a third party and what I’d like to one day receive for it? Too often owners/CEOs work hard at trying to build their business only to painfully learn one day that the strategy they were employing wasn’t audacious enough for truly getting them to where they wanted to get. And the reverse could happen, your plan could be overly audacious and introducing unnecessary cost and risk to you.
- What is our company primary strategic need this year – is it we need more revenue or we need to do a better job of fulfilling on what we already have in our backlog or is it we need to build a better customer experience? Are your key managers aligned with you on this?
- How unique is our product/service offering versus competitors – when is the last time we assessed this to make sure where we thought we were unique is still the case today. And where we are unique, are we effectively messaging it to our target audience?
- Is our financial and operational performance up to the minimum norms for our industry? Meaning, is your growth rate similar or greater to other players in your industry – is your gross margin on par with the norm in your industry and do you even calculate gross margin to the norm of your industry or do you have your own internal calculation that might one day confuse a potential acquirer? We always say to owners/CEO’s, don’t compare your business to itself, ensure you know how it stacks up to industry benchmarks.
There is no shortage of great strategic questions you want to ask yourself and dialog with your team on a regular basis. Doing so will absolutely have you identifying steps to protecting and building the worth of your company. Don’t delay another day in asking great strategic questions…start now and reward your future self with the benefits that you’ll derive from the healthy new dialog.
