Just because a friend got a great multiple doesn’t mean you will
When the day comes you look to sell your business, the deal you get will be custom for your company. Don’t fall into the trap of believing that what a friend received for their company will be what you get.
It’s common when we meet company owners and CEO’s to hear that a friend they know with a company in their market space recently sold and “got a great deal”. They then start to assume that the deal their friend got will be the one they will get. Most time, it’s not.
It’s fine to use other transactions in your market space as a reference point but not as a definitive. No two businesses are alike, therefore no two transactions will be alike. Your company will be unique in key areas such as;
- - Scale of revenue and profit
- - Quality of the sources of revenue and profit
- - Customer or supplier concentration
- - Visibility to future growth – predictability of that growth
- - Infrastructure to scale further
- - Intellectual property or a special sauce that provides a competitive advantage
- - Quality of the organization and team (no reliance on selling ownership)
Begin preparing today to ensure this list above is getting quality attention and improvement by your team. Focus in these areas and you will greatly increase the likelihood of one day receiving a strong offer from a third party. But not addressing these areas and just hoping to get what a friend said they got is a surefire way to a disappointing exit.
