COMMAND YOUR PRICE

If you are an owner working towards 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 departed. Even if you don't want to potentially sell until some time down the road...

Establishing a planning culture NOW is essential to maximizing your selling price when that time comes.

Put yourself in the business buyer's shoes. Would you feel more confident about buying a "flying by the seat of their pants" company or one with a documented history of planning growth... and then making it happen per their plan?

• The plan-driven company will be able to show you their projections for the next few years- AFTER the company changes hands- and exactly how they expect to accomplish their projections. They will be able to show the plan for the last few years and how they actually did against it. Confidence about the future can be built this way.
• The plan-less company can only offer a lot of talk and little to back it up. There's plenty of hard facts about the PAST, but the near and long-term future is all smoke. Note: while trying to sell it, there's no way to fake this. Prospective buyers quickly discover you have no formal plan. It's one of the first things they will want to see.

The "seat of the pants" company also comes with great buyer risk perception: often in businesses without plans, someone owns the central dispatcher role of making up the plan for the next few days on the fly. If that person is the owner/seller- as it very often is- what is likely to happen to the entire machine after the most crucial cog departs?

Nothing beats down the offer price faster than the belief that the owner basically IS the business: when the owner goes, the business may not be able to survive.

If you want a cash-out maximum you need to proactively CHANGE that perception ASAP.

Many owners love that center-of-the-universe role because it makes them feel essential, needed, etc. The whole company is in orbit around- and heavily dependent upon- THEM. 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 structuring their business with themselves as the core... the central brain of what is sometimes an elaborate body.

We've observed a number of companies set up where the owner would choose to sacrifice revenue & profit maximization to retain his or her place as THE essential player at their company. They often consciously or unconsciously choose to feed their egos over growing their businesses beyond what they can personally manage. In purely objective terms, they are their company's chief bottleneck... standing directly in the way of growing the business to its fullest potential.

In spite of how well this 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 function on its own.

Choosing to leave it this way and trying to sell this type of business at some point can make the buyer thoroughly 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 such a business? If you could discount the ambiguous value of the team, there's little left beyond depreciating assets to influence your offer price. Allow this perception to be valid... which is only a CHOICE YOU can make (or opt to change)... and you'll almost certainly end up getting offers down at the low end of the price range and probably BELOW the lowest low 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) that remains 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 HAVE 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 imagined- adversely slice into a buyer's offer price flexibility. They don't want to pay maximum price AND be required to take such leaps of faith. Again, change shoes: what would YOU do if you were the buyer with such perceptions?

"SO HOW DO I FIX THIS? HOW DO I FACILITATE EVENTUALLY GETTING A MAXIMUM PREMIUM FOR MY BUSINESS?"

You mitigate those leaps by installing a planning culture ahead of the sale... ideally well in advance... so there is time to build up a track record of diversified TEAM achievements within that plan. If the history of your business has been about you being center of the universe, start evolving your universe. The more you can show how the business doesn't need you to continue to prosper, the more enthusiasm a buyer(s) will have for the acquisition.

Ideally, by the time you are entertaining buyers, the transformation has been complete for some time and the business seems to be growing well on "auto-pilot." That means the employees are doing a great job driving growth without you, so it is likely they can continue to do that if the business is sold to a new owner. Metaphorically, your "baby" is fully grown and able to stand on its own feet.

Delegating away all of the fundamental tasks crucial to continuing to maintain & grow a business makes it a self-sufficient whole... 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. Your good employees will appreciate getting to continue to have their jobs after a 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. Again, change shoes. How appealing would this business be to you vs. the kind where the owner seems to be absolutely key to 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 sell premium higher... to much more greatly enrich themselves. 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. You have to keep your eye on THAT big, BIG prize. It can motivate you to do the right thing.

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. Business buyers are simply investors- they covet ROI confidence & risk reduction. Buyers 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.

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.
• 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 grow the connection between the plan and company results.
• are one of those owners who 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 planning culture is establishing an objective link between forecasting growth & making it happen.

The key 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 departed 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 at the helm the best your company has ever had. Bonus: buyers will be excited by the sales growth momentum leading into the sale and the forecast for even more beyond it. That ALSO plays a big role in getting you the maximum premium.

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 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 bring tremendous resources to help you get well prepared to cash out to the max. Contact us for a FREE CONSULTATION