Rock LaManna12.08.14
Joe Worth of Entrepreneur magazine published an interesting statistic recently. He noted that only 2-3% of owners are actually ready to sell their business.
There are a lot of businesses out there that could be sold, sure, but Worth points out that only this tiny percentage is ready financially, operationally and even emotionally.
It comes as no surprise to me, as I’ve seen deal after deal fall apart for a variety of reasons.
Perhaps the financial reports weren’t accurate. Maybe a company’s processes weren’t well-documented, and the operational focus wasn’t up to snuff. Or perhaps the owner got cold feet at the last moment and pulled out of the deal.
The reasons are myriad, which is really the point. There are many, many things you need to address before you put the business up for sale. Here are a few offered up by Worth, along with some of my own thoughts:
Trust your managers to run the business. No investor wants to buy your company if you’re the one who makes it all happen. They want a self-sufficient business. So how do you make that work? Put your people in charge, let them run the show and remove yourself from the picture. If a buyer sees you have an autonomous management team, they’ll feel better about the buy.
Build up the EBITDA. The bigger the EBITDA, the higher the multiples. It’s a simple fact for any business. The question is how do you get there? Hopefully your business has been focused on EBITDA all along. Can you boost it by diversifying your product line? Or streamlining your operations? You need that EBITDA to be in top shape.
Form your pro forma. A pro forma is your vision of the future. But more than just a pie-in-the-sky dream, it is built of concrete figures that show what you plan to do and how you can accomplish it. Investors want to see your financial model, so start building it today.
Fact-check your financials. When is the last time you performed an audit on your own business? Think about doing it sooner than later, as a savvy investor will review your financials with a fine-tooth comb. An audit will also show you where your organization is overspending or underperforming, which ties back up to the EBIDTA.
Get real. A critical mistake I see business owners make is the inability to forge realistic expectations. Everyone has dreams of making millions when they sell their business, but dispel all those thoughts. Just wait to see what an independent appraiser has to say. Form your strategy based on that value, not the emotional one you’ve preconceived.
These are just a few items that can propel you into that elite 2-3% sellers club. Overlook them, and investors will likely overlook your business.
Rock LaManna helps printing owners and CEOs use their company financials to prioritize and choose the proper strategic path. He is President and CEO of the LaManna Alliance, and provides guidance on how to grow a printing business, merge with a synergistic partner, make a strategic acquisition, or create a succession plan. Rock can be reached by email at Rock@RockLaManna.com.
There are a lot of businesses out there that could be sold, sure, but Worth points out that only this tiny percentage is ready financially, operationally and even emotionally.
It comes as no surprise to me, as I’ve seen deal after deal fall apart for a variety of reasons.
Perhaps the financial reports weren’t accurate. Maybe a company’s processes weren’t well-documented, and the operational focus wasn’t up to snuff. Or perhaps the owner got cold feet at the last moment and pulled out of the deal.
The reasons are myriad, which is really the point. There are many, many things you need to address before you put the business up for sale. Here are a few offered up by Worth, along with some of my own thoughts:
Trust your managers to run the business. No investor wants to buy your company if you’re the one who makes it all happen. They want a self-sufficient business. So how do you make that work? Put your people in charge, let them run the show and remove yourself from the picture. If a buyer sees you have an autonomous management team, they’ll feel better about the buy.
Build up the EBITDA. The bigger the EBITDA, the higher the multiples. It’s a simple fact for any business. The question is how do you get there? Hopefully your business has been focused on EBITDA all along. Can you boost it by diversifying your product line? Or streamlining your operations? You need that EBITDA to be in top shape.
Form your pro forma. A pro forma is your vision of the future. But more than just a pie-in-the-sky dream, it is built of concrete figures that show what you plan to do and how you can accomplish it. Investors want to see your financial model, so start building it today.
Fact-check your financials. When is the last time you performed an audit on your own business? Think about doing it sooner than later, as a savvy investor will review your financials with a fine-tooth comb. An audit will also show you where your organization is overspending or underperforming, which ties back up to the EBIDTA.
Get real. A critical mistake I see business owners make is the inability to forge realistic expectations. Everyone has dreams of making millions when they sell their business, but dispel all those thoughts. Just wait to see what an independent appraiser has to say. Form your strategy based on that value, not the emotional one you’ve preconceived.
These are just a few items that can propel you into that elite 2-3% sellers club. Overlook them, and investors will likely overlook your business.
Rock LaManna helps printing owners and CEOs use their company financials to prioritize and choose the proper strategic path. He is President and CEO of the LaManna Alliance, and provides guidance on how to grow a printing business, merge with a synergistic partner, make a strategic acquisition, or create a succession plan. Rock can be reached by email at Rock@RockLaManna.com.