Is it Time to Sell the Company?

Every CEO encounters a time when they will sell their company.  They either want to, need to, or should.  A company is merely a means to an end.  It’s not our reason for waking up in the morning.  Or shouldn’t be.  There will be a time to sell it.  The key is maximizing its value.

Years ago, a mentor told me “the best time to sell a company is when you have an offer”.

How do you know when it’s time to sell?  How do you know if the offer is fair?  How do you position your company to be worth the maximum amount?  How do you find someone ethical to help you sell it for reasonable fees?

A few years ago, a client I had coached told me that he wanted to sell.  He wanted a sale price of $50 Million.  He was doing everything right.  I introduced him to an M&A firm, who then helped him market & sell the company for north of $100 Million in cash.  Needless to say, the CEO was thrilled and so were his employees.  Drop me an email if you’re ready to sell- and I can introduce you too- Cameron@BackPocketCOO.com

How did he do it?  How can you do it?

1)   Think Of Your Company As An Asset:  Starting today.  Think of the company as an asset that you need to maximize the value of.  An asset you need to take care of.  Eventually, perhaps now, an asset that you will sell.  If you are not waking up every day 100% excited about building your company, it’s a pretty good sign that you are ready to sell.  The best time to sell a business is when it is kicking ass.  Not when you’ve let it slide in revenue or profit or brand awareness.

2)   Know What Makes A Business Valuable:

1. Buyers want to see that you have multiple revenue streams.  They don’t want to see all your revenue coming from only a few large clients.  There is too much risk for them to get excited about a few large clients, regardless of how much you try to convince them the clients will stay after a sale.
2. Buyers want to see that you have plentiful and happy customers.  They want to see lots of potential for word of mouth, testimonials, and growth.
3. Buyers want the company to have a great management team.  Once you’re gone, they want to rely on your people to grow the company.
4. They want a company that has solid brand awareness, great buzz, and positive word of mouth to build off of.
5. They want a company with systems in place so the company doesn’t count on the owner to be there day-to-day.  The systems don’t have to be perfect, but they can’t be all in your head either.
6. And they want to see what revenue you have that is recurring or locked up for the future.  Predictable cash flow is key in helping to get a higher sale price for your company.

3)   Get Focused:

1. Focus on growing Revenue.
2. Focus on growing Gross Margin.
3. Focus on cutting unnecessary Expenses & Overhead.
4. Focus on building an A Level Team and handcuffing them to the company.
5. Focus on systemizing all areas of the business – with systems that are good- not perfect.  So the buyer sees that it’s about people & systems- not just about you.

4)   Ensure You Have An A Team:  If you don’t have a really solid management team, can you recruit one?  Having a group of employees that investors will really like is worth tons in terms of valuation for you.   One A player replaces three C players.  Get started.  Happy to intro you to a few great Exec Search Firms to help you poach great people – email me – Cameron@BackPocketCOO.com

5)   Organize Your Financials:  We all know that entrepreneurs write off as many expenses as possible.  Start keeping track of all the “expenses” you write off, so that you can show buyers how much money the company would really earn if they had a manager running it.  E.g. Be ready to show them all the personal expenses and non-recurring expenses you run through the business, such as travel, meals, entertainment, repairs etc.

6)   Organize Your Data: Track everything so you can show buyers any data that will show the company in a positive light going forward.  Show them how much it costs to get a customer.  Show them lifetime value of a customer.  Show them how the marketing dollars you are spending are bringing in new clients.  Data, data, data.  The data you can show them increases the price.

7)   Build Your Brand Awareness:

1. Get as many customers, potential customers, and potential employees to know your brand.  The stronger your brand buzz is, the higher the price will be.
2. Create raving fans.  Buzz from customers is gold in your pocket when you’re getting ready to sell the company.

8)   Lose Lips Sink Ships:  Don’t tell anyone that you’re planning to sell the business.  No one.  You aren’t selling a house.

1. Employees, bankers, customers and suppliers will all panic if they learn you are selling.
2. Competitors will try to bury you.
3. It’s one of the core reasons why using a great M&A firm will help you maximize your sale price, while minimizing the risk of people knowing you’re up for sale.

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