Back to Basics

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I have been sending you these periodic email blasts for about three years. Since many of you joined my distribution list only recently I thought I would review some of the highlights from the past. Newcomers, enjoy! Veterans, although I am sure you have committed my writings to memory, I hope this message will help you brush up on some key points from the past.

As most of you know, after years of M&A and investment banking experience I now devote myself to counseling business owners on what they can expect once they enter the M&A or debt seeking process. I begin by working with the owners on establishing realistic expectations as to value and then take them through a “course” in” M&A 101″ and financial modeling. Following is a review of a few of the basic points to consider.

Be Prepared

12Be Prepared Most business owners will exit their companies by selling. The smarter ones will admit they really know very little about what’s involved. What will someone else pay for my business? What questions will they ask and am I prepared to answer them. How long will the process take and what will it cost? Who else should be on my “team” and when shall I bring them in? Are my financial statements up-to-date? Do I understand everything – everything – about those statements?

You know that the way to make God laugh is to tell Him your plans. The adage is true in life, and it’s particularly true in business. Let’s say you’re fifty and you don’t plan to sell for ten years. What if someone walks in tomorrow and wants to buy your business. Are you ready? These are just a few of the many questions you should be asking yourself. There is a lot you can do to plan for the future and you should start now.

Know Your Value

15There are at least three ways to measure the value to your company: (1) What your wealth manager says you need to maintain the life style you want. (2) What your ego says want for your business and (3) What an informed buyer will actually pay for it. Our first order of business is to take the owner through the process of valuing his or her business through the eyes of a professional buyer. We do it with a customized user-friendly Excel spreadsheet that we will leave with our client with operating instructions. If your prospects change after we leave, a few simple key strokes will tell you how those changes will affect the value of your company.

A good sale process will require the buyer to mention price first but it sure is comforting to know ahead of time what he is going to say.


13With real estate what counts most is location. With companies it’s management. Even if you have somebody to succeed you, count on staying with the company for at least ninety days after you sell. It could be a lot longer. Assume that whoever buys your business will need a professional manager to run it. Maybe you will be lucky and the buyer himself will run it but do not be caught short. Provide for your succession and everything will be easier.

When you meet with possible buyers, introduce them to your managers. Suppress your ego and let them answer the questions. Show them off. Brag about their accomplishments. Build them up in the eyes of prospective buyers. If your people are good, it will be one of the strongest selling points you have.