Value is Often in the Eye of the Beholder
Takeaway: It is extremely important to understand the value of your business in the way the right buyer will see it.
There are two top of mind of issues that we hear from our clients over and over:
- What’s the value of my business?
- How do we keep it confidential?
You have come to a point where you are ready to sell. What you have is what you have, in other words, you are not going to look to make any changes to the business to improve it at this point to sell it. We hear that comment frequently.
The client says, I know I need to add salespeople, the website needs revamping, the company needs to add new equipment/technology, the new owner can do these things. Clearly, all of these things add value and buyers are ALWAYS looking to find ways to improve the business.
In fact, much of what we do in “selling” the business is highlighting how the business is positioned and what improvements can be made to take the company to the next level.
When selling, beauty truly is in the eye of the beholder. Over the past 20+ years representing clients, buyers are looking for opportunity to improve upon what is already there. So no matter how the company is currently positioned, one thing is common: you have to be able to outline the next move. Where does the company go from here?
We have represented many businesses that are beating all the averages, and have above market gross profit margin and EBITDA. The revenue generated per employee was 3x’s the industry standard. The companies had a diversified customer base, growing sales, broad & expanding product offering.
While we successfully sold these businesses, some of the comments were not what you would have anticipated from buyers.
Some of the buyers were actually afraid of the company because it seemed too perfect. Some even said they felt the companies ran a little “too perfectly,” and were worried they may not be able to add much to them. They did not see anything that they could improve upon. However, these companies still sold to the highest bidders.
Opportunity often lies in what can be done with the business in the future.
If you can answer that question, you will gain the interest from the best of buyers.
You have to have competition, don’t try to sell your company with just one buyer. Competition will give you confidence as you talk with multiple buyers. Buyers will become quite aware that they are in competition for the business and that is a wonderful position to be in as it provides the needed leverage to maximize the selling price.
So don’t make the mistake of comparing your company with the one down the street or the one in the Wall Street Journal. The value of your company is a one-off situation and, for that matter, is the most important value of any company because it represents the dollars that is most meaningful to you.
Identify the opportunities and sell by creating a competitive environment.
We can help you with both of those and maximize the value in the process.
We are here for you if you have questions about selling, and ready to help you get started when you are ready.
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