Paint a Picture
One of the most strategic ways you can add value and decrease the perception of risk in the mind of a buyer is to craft a story for the future. When you can paint a picture about how this asset (your company) can produce a predictable recurring profit and value in the future, the more they’re willing to pay for that asset today.
Many savvy buyers will want to value your company based on the past. Often this is called trailing 12 months, or prior fiscal year. While those things are important, make sure to cast a vision for what the asset can do going forward, in the hands of a buyer. In a growing business, you want to emphasize what you see out the front windshield rather than the rear view mirror.
- How have the key investments you’ve made in infrastructure such as systems, processes, software, and technology created a way for the business to run without the entrepreneur involved in the day-to-day?
- How has your focus on acquiring blue chip customers, and top-notch customer service going to serve as the springboard for future lead generation?
- How will your investment in people and the formation of an exceptional leadership team going to help multiply the productivity and retention you will need after the transition?
- How has your decision to define a unique brand promise and execute that promise in a differentiated way going to lead to higher sales and brand awareness in future years?
Mediating the perception of risk and showing a buyer what to expect in the future is imperative during the exit process.
The Wealth Event
Up to this point you have run your business as a way to generate income and profit. You’ll sell your business to create wealth. Typically, you’ll sell for a multiple of that income. On the lower end it’s 3 or 4x. On the high end it can be as high as 25 times your income! It could be the single largest wealth-building event in your life. When you’re planning your exit, you and your exit advisor should cast a vision and illustrate how much the business is truly worth as a future asset. The buyer should understand both the financial value and the strategic value, which are two different things. Painting this picture could be worth millions of dollars. So get your paint brush ready!
If you’re considering an exit anytime in the next few years, please download our free Whitepaper entitled Seven Traps Sophisticated Buyers Deploy Against Unwary Sellers. This Whitepaper outlines the most common tactics that Private Equity Firms or other experienced buyers use to intimidate entrepreneurs who are going through this process for the first time.
We are passionate about making sure entrepreneurs get to experience a smooth and profitable sale of their business. From maximizing your valuation through the scaling process, to the final stages of taking it to market, we would love to help you. We offer growth strategy coaching, as well as exit advisory services.
Please contact us to schedule a call where we can discuss your specific needs.