How to Position Your Business to Sell
You spent a lifetime being successful in your chosen field or industry. Through trial and error, you learned how to monetize your business and brand in the marketplace. Revenues and profits are stable and you may be thinking about the next step for your company – either succession to the next generation or a liquidity event.
You Know How to Make Your Company Successful; Do You Know What it Needs to Attract High Valuation?
The skills, expertise and knowledge required to start and build a business are well-known. You analyzed the market, developed a product or service to meet the needs you identified, then you took deliberate, calculated steps to bring that service or product to market. The focus of your efforts was on growth, market expansion and profitability.
But what private investors or capital managers look for in their next investment requires a different approach.
It normally takes 1-3 years of focused, deliberate attention to groom a company to withstand a stringent due diligence review by a potential investor or buyer. During this transition stage, a different mindset and perspective are crucial to the ultimate goal of a liquidity event or succession to the next generation.
The Transition Stage requires a Focused, Deliberate Process
When your company is in the transition stage, the goals, focus and strategies are different from the growth phase. It makes perfect sense, because you are now moving toward a new destination.
You should be as methodical and strategic in the transition process as you were during the growth and expansion of your business. When you use time-tested, proven methodologies to ensure that your business is ready for a due diligence review, you, your shareholders and your successors will reap the rewards.
Five Critical Areas Inside Any Company that Should Exhibit Best Practices
Any business, no matter what the focus or industry, has five critical areas that support the business model. If any of these areas are not running effectively or efficiently, it can impact the overall health and viability of the company. The five areas include:
- Contract Review/Processes
- Finance & Reporting
- Corporate Structure
- Human Capital
- Conflict/Risk Management
When a prospective buyer conducts a stringent due diligence review before making an offer, if one of these five areas are substandard, it directly impacts the value placed on the entire company.
For example, a potential buyer will automatically devalue a company if it does not have professional financial reports available. If there is a lack of consistency in the sales process, a potential investor may not have the same confidence that sales will continue after a capital injection. If there is a pattern of claims or lawsuits from vendors or customers, succession of the company to the next generation is jeopardized.
By introducing best practices in these five areas, inefficiencies are reduced, scalability increased and consistency in performance assured. Stability, consistency and growth are the end results, which directly impacts value.
Doesn’t your life’s work deserve the effort necessary to transition to the best and highest result?
JAMES D. SHIELDS – After more than three decades practicing commercial business litigation and representing entrepreneurs in every stage of their business, I have come to the conclusion that it is not just what you know, but how you apply it. Strategic planning, creative problem solving and a deep understanding of business in general and yours in particular are the pillars of Shields Legal Group’s professional services. Our unique Growth to Exit service for companies and investors planning a liquidity event or succession to the next generation could be the guidance you need to transition your company.
To learn more, please visit ShieldsLegalGroup.com.