How Much Is Your Business Really Worth?
If you’re in business, you’ll undoubtedly ask this question at some point. Whether you’re looking to sell right now or have a clear plan of action to realise your exit further down the line, your business valuation will be of significant interest.
It’s ultimately the wrong question though.
Here’s the real question you should be asking yourself:
“How do I maximise my business’s true value?”
We Suggest You Let The Market Decide
Whilst we totally agree it’s important to have a realistic valuation placed on your business, it should only be the starting point of a negotiation. At the end of the day, your business is only worth what a willing purchaser is prepared to pay. This will be influenced on a variety of factors including things like revenue, growth potential, profitability, intellectual property, business synergies etc. the list goes on.
The valuation of your business is just the beginning of your journey towards completing your full or partial exit, but don’t take it as gospel. If you engage the correct exit marketing strategy and negotiate with more than one acquirer, there is a good chanced that the market might well decide that your business is worth more than the valuation suggests.
With a confidential research, sales, and marketing strategy, and a process led with experience and knowledge, there is no reason you cannot find multiple bidders. That will give you the competitive tension you need to find the right fit, coupled with the best price. This competitive bidding situation is what we mean when we say ‘let the market decide’.
Here’s An Example Of What We Mean…
Recently, we were introduced to a business owner through a mutual contact. They told us that their industrial equipment maintenance company was on the market with another broker. They were seeking a trade buyer, but frustration had crept in because it had been on the market for about 2 years and, so far, received very little interest.
After speaking to the vendor we were sure we could help. We told them there were 3 major things that should be done differently:
1. Invite offers, rather than setting a price in stone.
When we looked at the financials and trading history, we thought the valuation quoted by the previous broker was low. The fact it was being marketed with a ‘For Sale’ figure astonished us. Doing this creates a ceiling price and can easily limit what the vendor could hope to achieve from the sale. By inviting offers, the potential buyers were compelled to do more research and investigation around the business and its opportunity. During the process we were able to qualify out the wrong buyers and bargain hunters and concentrate on developing the interest of complementary acquirers.
2. Research strategic fits.
Any old buyer simply isn’t good enough when you’re trying to secure a premium business value. A buyer with a strategic fit within your own market, or a business with strong synergy and a desire to break into your sector, will generally have a better chance of making the acquisition a success. That means they’re far more likely to place a higher value on your business. With this particular example, we committed to finding larger, complimentary, organisations, we were confident this would give the owners the best chance of receiving maximum value.
3. Engage in a complete marketing and outreach process.
It never ceases to amaze us how many business brokers and M&A advisers fall at the first hurdle, the buyer research plan. This is the foundation to any successful business negotiation and sale, if your adviser cannot get your business in front of the right prospective buyers, the process will fail. Identifying and reaching out to the right decision makers is a fundamental part of the deal process. You must be resilient, tenacious, credible, and trustworthy and never stop looking for new buyers for your client until a deal is agreed. With over ten years’ experience and 100+ deals completed, it’s genuinely one of the aspects of the sales process we find most enjoyable.
The Perfect Outcome…
By doing these things differently and running the process in a structured, results driven way, we found the right buyer and agreed the deal within 6 months of our engagement.
The best bit? We managed to secure our clients a sale price at just over DOUBLE what the original broker was marketing the business at. Being a retirement sale, this significant uplift on the final sale price is genuinely life-changing for the outgoing owner.
We have a strong history completing many deals of all types and sizes, however we must admit there’s something particularly pleasing about helping a business owner enhance their retirement pot. It was a real win-win. All involved were left delighted by the result.
Ready For Your Business To Be Valued?
If you are interested in a full sale and exit, a merger with a larger trade buyer or just fed up with your existing broker adviser, why not get in touch for a confidential chat?
If you would like to discuss your business exit strategy, please email Tony at email@example.com.