Planning a business exit? Your first step should be to stop and consider exactly what potential investors are looking for in an acquisition.
Too many business owners decide ‘this is the year to sell’, then are bitterly disappointed when valuation doesn’t meet expectations. Preparation for a business exit is often underestimated, resulting in a less than ideal valuation.
It takes significant effort, commitment and time to ready a business for sale. Here are eight strategies to capture investor interest and boost your business’ valuation.
- What’s the strength and capability of the existing leadership team? If you’re planning a business exit, who will lead the business post transaction? A strong and capable leadership group will give an investor confidence that the business will continue to be well managed in the absence of the former owner.
- Do you have a strong culture? When every person in your company is strongly aligned to the business’ Values, Purpose and overarching goal (your Big Hairy Audacious Goal) that is when a strong culture exists, and it’s crucial to a successful sale.
- Have you achieved strategic clarity? Where is the company heading and what is the plan to reach these goals? Investors value the past and buy the future, so will want to know who your Core Customer is; how the company differentiates itself in the market; what services will be provided to the core market in the next 3-5 years; the focus for geographical territories and what competencies must be developed to deliver the plan.
- Can you boast specialist competencies or capabilities? Business owners should carefully consider competencies which may be considered ‘run-of-the-mill’, but could be of considerable strategic value to another company. Strategic buyers will be looking for competencies to acquire – those they don’t possess and don’t have the time or skills to build.
- Have you clearly communicated your growth plan to the wider business? It’s one thing to have a well thought out strategy, but many leaders keep this close to their chest, introducing an element of risk for the prospective buyer after a business exit. Companies that exceed valuation expectations have ensured everyone is aligned and understands how they contribute to mid and long-term goals.
Scaling Up Tip: If you’re looking to achieve greater visibility and engagement, the One Page Strategic Plan and Vision Summary are powerful tools. Other tools such as Metronome or the Scaling Up Scoreboard further elevate levels of engagement and focus on the plan.
- Can you provide accurate and meaningful business and market data? Access to such data is critical to the effectiveness of reporting dashboards. Investors will want to see hard data that supports the strategic assumptions you’ve made.
- Can you show evidence of consistent revenue and margin growth curves? Investors love predictability and are often driven by recurring revenue. They’ll also want to see potential for market growth, supported by thorough market share analysis.
- Is your execution system faultless? A proven, disciplined and focused execution system, leading to relentless repeatability, is another attractive feature for investors. Can you prove the business is scalable and driving consistently improving gross margins?
In the experience of the Scaling Up NZ Coaches and cross referencing with our partners, such as investment bankers STS Capital, we know it can take three years – or more – to prepare a business for sale. Even if you are not yet thinking about the prospect of a business exit, applying these eight strategies will get your business match fit and improve profitability.
Learn more here scalingup.co.nz/events