By: Patrick Ungashick

Two Mercedes-Benz sedans of the same make, model and manufacturing year are sold, but one goes for a higher price than the other. There are many reasons this commonly occurs. The car which sells for a higher price may have lower mileage, offer more amenities, is in better condition, or has a better service record.

This phenomenon is not unique to Mercedes-Benz or automobiles in general. The same reality happens with practically any asset, including companies. Take two companies from the same industry and similar size, offer them for sale, and one sells for a premium price compared to the other. It happens all the time. However, there is one important difference between cars and companies. The car that sells for a premium price may get its owner a few thousand dollars more at sale compared to the other car. The company that sells for a premium multiple may get its owner a few hundred thousand or a few million more for its owner. Therefore, it pays to know the right steps to take to maximize value at sale.

There are factors or conditions within a business—practically any business—that will increase (or decrease) its value at sale. If you are a business owner contemplating exiting one day in the future by way of sale, it is essential to know what these conditions are, and create them within your company. As you will see from this introductory article, the conditions take time—usually three to five years or longer—to fully achieve, so the sooner you get started, the better. Pursue these seven steps to make your company potentially sell for a higher price and better terms at your exit

Seven Steps to Maximize Business Value

1.Build a strong team. Companies with excellent leaders and managers are highly valuable. Practically every buyer wants top talent. If your organization has a strong leadership team that stays with the company after your exit, your business is likely more valuable.

2.Reduce dependency on you. If without you, the company will likely have lower sales, weaker operations, or make fewer profits, your company is nearly always going to be less valuable to a buyer. The business’s value cannot walk out the door when you do. (Here’s eight ideas on how to do this.)

3.Organize your financial statements and reports consistent with buyer expectations. Buyers want to see at least three and preferably five years of historical financial statements organized and formatted in a manner consistent with their expectations. Learn what the expectations are in your industry. These requirements could mean audited financials, using accrual and not cash accounting, or following GAAP standards. Make sure your EBITDA is normalized too. All of this work usually improves value at sale, assuming the company’s underlying financial results are attractive.

4.Be ready to present a compelling growth strategy and plan. Buyers purchase companies not for their past results, but their expected future results. Make sure your company can tell a credible and compelling story for how it will achieve significant growth over the next three to five years. This written document is commonly called a strategic plan. Ideally, your industry is a growing industry as well. Companies that can tell this story are nearly always more valuable at sale compared to companies that cannot.

5.Diversify your customer base. Buyers do not like risk, and often will either pay less for a riskier company or pass altogether on buying it. Customer concentration creates risk for buyers. When the faces around the table change, customers (even well-served customers) often pause and ask themselves if this wouldn’t be a good time to re-evaluate their options in your market. Ideally, no more than 10% of your sales and profits for the last several years have come from the same customer(s).

6.Create a brand that others want, and that you indisputably own. Your brand does not have to be the next Coca-Cola, Google, or Nike to offer value to a buyer. If your brand or brands are well-known and respected in your industry, that will nearly always add value at sale. Creating brand value takes time and effort. Make sure you own your brand—having a company, and a website or two is not enough in most situations. Work with experienced advisors to create a valuable and defensible intellectual property (IP) strategy and portfolio. (This webinar tells you how to build brand value.)

7.Remove obstacles to scale. Buyers do not want companies that have barriers to growth. They are attracted to businesses that seem to be well poised to achieve a significant increase in scale. Review all of your business’s vital systems and processes: sales, operations, customer service, financial, training, etc., identify potential or existing bottlenecks and devise strategies for removing them. Ask yourself and your team if your company doubled in size nearly overnight, could that increase in volume be supported? If not, address the limiting factors. Companies that can support growth are typically more attractive to buyers.

More Ideas and Resources

These seven steps will maximize your company’s value at sale. For this reason, we call the business conditions described above the Seven Areas of Transferable Value™.  These seven steps might not make your business bigger regarding revenue or profits, but they usually will make it easier and less risky for a buyer—thus increasing your company’s value when it transfers to a buyer or successor.

Certainly, there are other important steps to successfully selling a business. It’s important that you know your company’s critical performance metrics, and make sure that they are all pointing in the desired direction. Also, assemble a competent team to advise and assist you—resist chasing the latest “offer” that arrives in your email inbox.

Maximizing business value takes years of work prior to exit. Owners who wait too long to get started might still be able to sell their company, but they risk missing out on thousands to millions more at exit. If you intend to exit anytime in the next five years (https://www.navixconsultants.com/your-last-five-years-ebook) then it’s time to get started planning your exit.

If you have a quick question coming out of this article or, if you want to discuss your situation in more detail, we can set up a confidential and complimentary phone consultation at your convenience contact Tim 772-221-4499.

Workshops and Training Programs

Summer’s underway- time to enjoy some vacation and relaxation.  Summer also presents the perfect opportunity to assess the first half of the year and start strong heading into the second half.

We’ve got great tools to help you make 2016 a successful year.

Take a look at attached Workshops and Training Programs from PPI:  Workshop Portfolio

Each of our workshops can be customized to the current needs and challenges of your organization. They are engaging, enlightening and fun and will lead to improved cooperation and interaction.

How will you make 2016 a successful year for your organization?

As a business owner, you can do everything right within your business, but still fall short of exit success if the world outside your business is not aligned with your goals. There are five external factors that play a big role in determining the value of your business at sale. As a business owner, you must pay attention to these factors and plan for them as you set your exit goals-most importantly as you determine when you want to exit.

Watch this two-minute video to learn more, and then download this complimentary tool, The 7 End Zone Questions™ . This worksheet presents the seven questions that eventually must be answered in every business owner’s exit planning. The first of the seven is “When do you want to exit?” The sooner you tackle these seven questions, the more likely you will achieve a successful exit.

Contact us to schedule a complimentary discussion to help you outline the plans needed to achieve a successful exit.

The 5 External Factors That Drive Your Business Value at Exit

Do I have to pay $10,000 just to find out what my business is worth?

The answer is: “It depends on why you are asking”. There are a few specific situations that may require that you pay for a formal valuation. In all other cases, you can get professionals to provide the same price information for free.

Watch our short video below explaining how to determine if you really need a formal valuation, and if not, how you can go about obtaining free, high-quality valuation feedback on your company.

To discuss this further, contact me for a no-cost valuation feedback for your company.

Do I have to pay $10,000 just to find out what my business is worth

Video: Who Should I Use to Value My Business?

All successful businesses have an exit plan because every business owner will exit from the business, one way or another. The question is for you to determine the right strategy from the four potential exit strategies available to privately owned businesses and their owners. Identifying which strategy at the right time will save you money by aligning your goals with the business objectives to ensure a successful outcome for both the business and yourself. The four possible business exit strategies are:

1. Pass to Family (“Passer”)
2. Sell to Outside Third Parties (“Outie”)
3. Sell to Inside Key Employees (“lnnie”)
4. Planned Liquidation (“Squeezer”)

“Passers” (as we call owners who want to pass the business down to family members) must address a number of special issues to exit successfully. One is how to create a business exit that is fair to all of their children, whether they work in the family business or not. Woven into these issues are family dynamics, relationships, and realities which can undermine the owner’s successful business exit.
This short video explores one of those key issues-how to treat all of your children fairly when some of them work inside the business, and some do not. The differences between fair and equal and why you need to prepare a comprehensive plan that is aligned with both your family and your business goals.

Download the NAVIX® EXIT STRATEGY CHECKLIST – PASSING THE BUSINESS TO FAMILY that reviews the seven conditions that Passers must meet in order to achieve a happy exit.
Call us to schedule a complimentary discussion to help you outline the plans needed to achieve a successful exit.

http://www.kinane.com/why-fair-does-not-mean-equal-when-it-comes-to-family-and-business/

Buyers want to buy businesses that are growing. You already know this. But, growing how fast? What is the growth rate that buyers will pay maximum value for? What growth rate is too low to command top value?

If your exit strategy is to sell your business for the maximum value, you will need to present potential buyers with a written business growth plan that presents a credible and compelling proposal for how your business will achieve and sustain the growth described in this short video.

If your business does not have a track record of working from a written, up-to-date, multi-year growth plan, buyers may pay less for it at sale. Contact us to learn more about our exit planning advice and solutions, and how we help owners create value leading up to and at exit.

How fast does your business need to grow

Confidence among CEOs has remained higher for a longer period

than at any other time in the past ten years, according to a survey of

1,541 small- to mid-sized business owners. The survey, which took

place from March 9 to March 18, 2015, provides a clear snapshot of

current economic, market and industry trends.

The Vistage Confidence Index was 105.8 in the 1st quarter of 2015,

between the 107.5 in the 4th quarter and 101.3 in the 1st quarter of

2014. The recent survey represented the eighth consecutive year-to-year

increase, a new record for the persistence of optimism. The small

1st quarter loss involved all components, although none registered a

significant decline. The stability in CEOs’ confidence stands in sharp

contrast to the slowdown in the pace of economic growth at yearend,

which has persisted into the 1st quarter of 2015. Confidence

in the underlying strength of the economy has been maintained

undiminished despite a number of factors: a harsh winter, a tightening

labor market, rising wage pressures, weakening export demand, and

a pending shift in Fed policy. To be sure, some of these trends reflect

the growing strength of the U.S. economy. Overall, firms anticipate

that the economy will continue to make substantial progress, with

a resurgence in growth as the year progresses.

What are you doing to keep your company moving forward?

Follow these links for more information:

1q15 ceo conf info graph tjk

1q15 ceo confidence report

The Vistage 2015 forecast for growth is full of ideas, strategies and tactics to help grow your company in the year ahead.  It was released at the beginning of the year along with hundreds of other business and personal improvement lists to kick off 2015.

Can there be too many good ideas? Unfortunately, the answer is yes.  Too many ideas can confuse your focus and rob you of direction, leading to inactivity.  The New Year plethora of idea lists usually follows the same track as gym memberships – energized in January, forgotten by February.

The key to progress is continuous improvement. It needs to be focused and manageable.

So, let’s try something new. Now that we are away from the New Year noise we can explore the forecast one section at a time.

Try these steps to get better results:

• Schedule time to read the report when you can be focused and fully present.
• Jot down a few ideas and goals that are applicable to your company.
• Share the report, your ideas and goals with your team.
• Ask them how you can help them achieve the goals.
• Hold them accountable for results.

Here is the first section of five strategic areas for growth in the Vistage 2015 forecast.

Technology –

Key points:

• Embrace the Internet of things.
• Get your head in the cloud.
• Make big data a big deal.

Click the link for the full Technology report.

5 ways tech

3q14 small business confidence

3q14 small business confidence detail

Optimism among small firms in the September survey rose to its

second highest level since the survey first began in June of 2012. The

WSJ/Vistage Small Business CEO Confidence Index was 110.8 in the

September 2014 survey, up from 109.8 in August and posting a 5.2%

gain from last year’s 105.3. The steady improving level of confidence in

recent months is certainly good news, but the more important finding

is that since the start of the year small firms never lost sight of the

underlying strength in the economy.

3q2014 Vistage CEO Confidence Index TJK

3q2014 Vistage CEO confidence index infographic

Confidence among CEOs reached its highest level in two years,

finally achieving a lift-off from its favorable holding pattern in the

last three quarters. The Vistage CEO Confidence Index was 103.4 in

the 3rd quarter 2014 survey, up from 101.0 in the 2nd quarter and

97.8 in last year’s 3rd quarter, and the highest level since 105.1 was

recorded in the 1st quarter of 2012. There is no greater indication

of confidence in future prospects than a firm’s willingness to

increase their fixed investment spending and to expand their

workforce. On both counts, firms reported the most expansive

plans since 2006.