Preparation – The Key To A Successful Sale

By Generational Equity

12/18/2013

Many of you got your start with your business because you saw a need and knew you could fulfill it. But for most, the key first step once you identified the need was to convince a potential client that your offering would meet that need.

Chances are good that before you met with any of your potential clients, before you even attempted to convince someone that your option/product/service was preferable, you spent some time preparing. You made sure that before you sat down with any prospects that your presentation was well thought out, thorough, and detailed.

If you are still involved in sales pitches today, you probably still go through this same process. No matter how many years you have been “selling” your services, preparation is still key.

The same is true when you eventually look for buyers for your business. What amazes us as professional deal makers, though, is that all too often business owners do very little preparation in advance to make their companies “buyer ready.” In reality, we tell business owners, you should be thinking about finding a buyer for your business literally from the day you first start your company.

At this point some of you are probably saying, “Well, wait, my company is profitable and growing. What more do I need to do to make it ready for a buyer?”

I recently sat in on a webinar that was very enlightening on this topic. Although targeted towards high tech ventures, the basic concepts discussed apply to all companies in every industry.

Entitled “Technology M&A: Deal Preparation and Management,” the webinar had applications to companies regardless of their niches. Hosted by virtual data room provider SecureDocs, the first speaker, Christian Bennett, Managing Director of Pagemill Partners, had some really good points regarding deal preparation. He broke his discussion into two parts:

• External Readiness
• Internal Readiness

Again, although Mr. Bennett focused on these two key areas in relation to software and high tech offerings, the reality is no matter what your company’s industry, both of these are likewise important to you. And both are equally vital.

Building A Buyer Ready Business

External readiness is ensuring that your business is viable long term, especially under new ownership. This means reducing customer concentration (any client generating more than 10% of your revenue will raise red flags with buyers). It also is vital to sign long-term contracts with suppliers and customers to ensure a stable flow of business. Finally make sure that your company’s brand is well developed and your strategic growth plans are documented.

Keep in mind that buyers hate risk; the more you can do far in advance of selling to reduce your business’ perceived risk, the better your chances of finding and closing a deal with a buyer.

Internal readiness, as the name implies, is taking steps early in your company’s development to ensure that the company is not thoroughly and completely dependent upon you. Create a middle-management team, for example. Delegate key decisions to them. Groom your replacement. Make sure that your accounting system/software is the best available (within your budget, of course) so that you can document your profit margins and other key financial metrics. Buyers have significantly more confidence in a target that can quickly and accurately document its finances!

These are just a few basic examples of what you can do both externally and internally to prep your business for buyer scrutiny. If you would like to learn more, please feel free to access our library of whitepapers. These are complimentary to you and are written with one goal in mind: helping business owners prepare their companies for buyers.

No matter what, keep this in mind: The odds of you finding a buyer willing and able to pay you top dollar for your company improve dramatically if you take the time and put in the effort in advance to make your company “buyer ready.” The question is: Do you know what to do, the steps to take, to make this happen? Learn as much as you can in advance because unless you can think like a buyer, you may have no idea how to externally and internally prepare your company for the market.

Carl Doerksen is the Director of Corporate Development at Generational Equity.

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