At the end of the day, what buyers are looking for boils down to minimized risk and maximized return. Businesses with the highest value both reduce risk for a new owner and demonstrate growth potential. Therefore, it goes without saying that to demand a premium price for your business, you need to polish your value drivers, especially the ones that could use a little help.
By improving other value drivers such as goodwill and implementing recurring revenue, you automatically move in the direction of creating growth potential, but it is essential to do more than that if you want to see a better price for the sale of your business. You need a growth plan.
“While buyers will purchase a business at a price predicated on current and historical cash flows, their main motivation is the opportunity to grow the business beyond its current size.”
A well-thought-out and documented growth plan will show a buyer the feasibility of your company’s growth and even highlight possibilities they may not have considered simply because they don’t know the business as well as you do. A thorough, insightful, logical growth strategy written down in black and white will go a long way to showing buyer opportunities that can be tackled and exploited to increase future sales and profit.
Having a strategic growth plan that specifically demonstrates why the business and its cash flow will continue to grow after your exit will attract savvy buyers and command a higher price for your business, so if you don’t already have a documented plan you can present to a potential buyer, this should be the next step in your preparations for sale.
“Even if you expect to retire tomorrow, you need to have a written plan describing future growth and how that growth will be achieved…. It is that growth plan, properly communicated, that will attract buyers.”
Because future growth is tied to other value drivers such as a diverse customer base and goodwill, look to those areas first to determine what to include in your growth plan. Considering the answers to the following questions that cover most key areas will also help you establish your plan:
The goal of any growth plan is to clearly illustrate for a buyer exactly how sales can be increased as time goes on—and without you at the helm. A concrete growth plan can, and will, result in a higher valuation for your business, and consequently, a better price.
To better determine how to approach your growth plan and what to include in it, put yourself in the shoes of a buyer and look at it from their eyes, then fine-tune it with your knowledge of your business. Though buyers are interested in your earnings in the last 1 to 3 years, they’re far more curious about what the business could bring in, in years to come, under their ownership, not yours.
“Assume the buyer thinks their significant management experience will enable them to improve any business they acquire. What they lack is knowledge of your specific situation and what they can do to implement improvements.”
Outline precisely how specific areas of growth can be realized and highlight key areas that could lead to intriguing possibilities. Even go so far as to imagine what you would do if you had more capital, more time, and more energy to work with. Make your growth plan detailed and factual.
When done well, a solid growth plan can be tweaked for individual potential buyers, demonstrating a harmony unique to that buyer, making your business even more appealing and driving your value up. It may even serve to erase any doubts a buyer may have had by giving them new ideas about where they can realistically take the business given the foundations you’ve already laid.
While buyers will first look at your financial bottom lines such as your current and historic cash flows and your recurring revenue, their true interest—and the hook that will reel them in—is the potential for future growth and where the business can take them in the years to come, preferably with little effort and even less risk.
The ideal way to pique their interest and imagination is to present them with a personalized, strategic, and detailed growth plan that clearly illustrates the key areas in which they can achieve growth and offers them additional ideas they could implement once they take ownership. Think of a written growth plan as a snapshot that captures the larger picture of your business and its future.
“One way to improve the ‘property’ is to put yourself in the buyer’s place. Recognize what he or she will be looking for and then shape your business to fit those needs and desires.”
Draft your growth plan from the point of view of the seller rather than from yours, and you’re bound to see it more objectively and find additional areas of growth you may not have seen otherwise. This will guarantee a potential buyer will pause and see your business as a positive return on their investment, resulting in a higher price than you would have gotten without a documented growth plan simply due to the lessened risk and increased possibilities.
Once you have your value drivers polished and in place, make sure you partner with an expert in mergers and acquisitions so you can be assured you’ll get the best price possible for your business. Experienced brokers have spent years building networks and can use these networks to your advantage to bring the right buyers to the table faster than an owner alone could. Without access to those networks, it could take months or more to capture the attention of even one buyer, let alone multiple interested parties, and even then, they may not be the right buyers.
Muise Mergers & Acquisitions Inc. has spent decades building just those networks and can assemble the right buyers for you in an instant. Call them now at (902) 456.6473 or send them an email and put the pieces in motion to get the price your business is worth without hassle or delay.
Muise Mergers & Acquisitions, We also assist business buyers and sellers in the following Canadian provinces, Nova Scotia, New Brunswick, Prince Edward Island, Newfoundland, Ontario, Manitoba, Saskatchewan, Alberta and British Columbia. Copyright©2024
Our business was founded in 1998 by Maurice (Moe) Muise. Our team has extensive experience in facilitating the sale of virtually any type and size of business, including manufacturing operations, distributorships, retail, and all forms of service businesses