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PLANNING CULTURES MAXIMIZE BUSINESS SELLING PRICES

A planning culture is key to leveraging all the minds at your company toward maximizing your successIf you are an owner working toward a business sale scenario, maximizing your selling price multiple requires proving the business can forecast its growth and deliver on those forecasts WITHOUT YOU. Installing and/or leveraging a planning culture is the very best way to do this. It gives prospective buyers great confidence that those you leave behind (your team) can continue to deliver on such projections after you've cashed out. Even if you don't want to potentially sell until some time down the road, establishing a planning culture NOW is essential to putting as much of the sale proceeds in your pockets when the deal gets done.

Many owners love the center-of-their-universe role because it makes them feel essential, needed, etc. If the owner has a sizable ego (and just about all successful entrepreneurs do) there are few professional scenarios that can feed that ego better than this arrangement. We've observed a number of companies set up where the owner would choose to even sacrifice revenue & profit maximization to retain his or her place as THE crucial player at their company. They often consciously or unconsciously choose to feed their egos over growing their businesses beyond what they can personally manage.

However, in spite of how well that arrangement can seem to work- even over many years- it is an enormous liability when trying to sell the business to someone else. That culture is usually staffed by managers- executives included- who have little choice but to defer to "the boss" for all decision-making. More simply, the owner of that kind of company is often an owner of a business of followers. Chop off the head and the body won't be able to function very well... if at all. To a prospective buyer, this kind of business is loaded with risk because the owner's departure may kill a business unable to stand on its own. This can make the buyer discount your team- including whether they should even keep them as employees after the sale. If you were the buyer, how excited would you be to make a generous offer for that business? If you could discount the ambiguous value of the team, there's little left to influence your offer price but mostly depreciating assets. Allow the sacrifice the team productivity premium and you'll almost certainly end up getting offers below your most modest expectations.

Some owners who have fostered this kind of environment will try to spin prospective buyers into believing that they've long been grooming their replacement. But buyers see right through that spin. The buyer's risk is not in replacing one, lone head with another... it's in the relative strength of the whole (team) who will remain after you leave. A company overly dependent on just a few people- or just one- is a company ready to die should anything happen to those few people or that one. If you've groomed your replacement in an owner-centric enterprise, your buyer would have to take a great leap of faith that that replacement can actually do the whole job when you leave and that your replacement won't quit, die, over-exploit the importance of them remaining with the company, etc. Such risks- real or perceived- adversely slice into the buyer's offer price flexibility. They don't want to pay maximum price AND be required to take such leaps of faith. You mitigate those leaps by installing a planning culture ahead of the sale.

Motivating Business Buyer Prospects to Pay a Lucrative Premium for Your Company

Delegating away all of the fundamental tasks crucial to continuing to maintain & grow a business makes the whole self-sufficient... a company that can continue to prosper long after the founder or owner has departed. It's what the owner should do anyway as most owners would prefer that their baby can live on beyond their retirement... if not for their own legacy, then for the good people they employ (who will appreciate getting to continue to have their jobs after the sale). Spreading those crucial responsibilities around to your team is viewed as diversifying risk for your buyer. Odds improve that the business can thrive after you depart and the new owner doesn't have to worry about any one (or few) players owning too many of the keys that drive ongoing success.

Some ego-driven founders or owners typically detest the idea of delegating their crucial contributions because they either believe that only THEY can do the things they do... or they can't bear the idea of eroding company dependencies on themselves (even if it is by design... to help drive the business sell premium higher). Yet it is exactly what the owner wanting to sell in the next few years should do if they want to maximize their take from the transaction.A planning culture is valued by a potential buyer or investor because it demonstrates that the business has mapped out its future growth

Go into the selling process with no planning culture and you definitely will NOT get maximum offers for your company (to the contrary, such owners are always disappointed with what the market is willing to pay for their business). Buyers are just like investors- they love confidence & risk reduction. They want to see that their hard-earned money has a very favorable chance of being returned with a great profit... at the least possible risk. Demonstrate a solid planning culture over a few years PRIOR to when you want to sell your company and your plan projections for the years AFTER the sale will carry great weight with buyers. Make your team into a self-sufficient machine that no longer depends on your personal contributions and the ambiguous value they collectively support works to your benefit in negotiations. The result is much more favorable pricing.

The Big Innovations team can help you evolve your business with a planning culture. If you have no written plan, we can help you develop one from scratch. If you have a plan that is mostly ignored, we can dust it off, strengthen it and help you with implementation, communication and ongoing plan management functions to improve the connection between the plan and company results. If you are one of those owners that retains crucial functions, we can help you smoothly transition those responsibilities to others insuring they carry on doing the great job you've done. Etc.

The main objective in any good planning culture is to establish an objective link between forecasting growth and making it happen. The task is developing your team to be exceptional at doing both so that your future buyer prospects can feel very confident about the team's ability to continue to perform per the plan after you've left the company. Between now and that future sale, a good planning culture offers the added benefit of leveraging the cumulative pool of minds & energy in your staff to help make your final years the best your company has ever had (and buyers will be excited by the sales growth momentum leading into the sale and the forecast for even more beyond it).

Our network of specialist talent can help you with all of this and more. If the next few years need some extra marketing or sales punch to enhance that growth momentum, we're ready to get to work. If your products or website need to be modernized, we can wow both customers and those prospective buyers with best-in-class upgrades. Communications. Preparing for the due diligence phase. Exit strategy. Researching & establishing a target price range. Sourcing, developing & nurturing a choice pool of prospective buyers. Transition strategy. Etc. We can bring tremendous resources to help you get well prepared to cash out to the max. Contact us for a FREE Consultation.


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