Getting your company ready for a sale
posted on June 5th, 2014 in Category:
Most entrepreneurs dream about that big day when they get that large financial reward for all the blood sweat and tears that they have poured into their company. It is hard NOT to dream of that day and it does provides a powerful incentive for all the work and the risks entrepreneurs must take along the way.
Getting your company ready and attractive for a sale can be a challenge given all the daily “fires” that need immediate attention. In addition, what may be a quick and cheap “fix” may in the long run be counter to your goal of positioning the company for a sale.
Here are a few items to keep in mind that may provide a framework for good planning and long term value:
Don’t fixate on THE sale
I have often been told that a weakness is an exaggeration of strength. So to dream about the sale is good, to fixate on a sale is not. It is so hard to predict market opportunities, competitors and strategic alliances that all have an impact on a sale of your company. With so much uncertainty, the game plan should be to constantly add value and expect that at some point, the stars align that provide a potential suitor(s). Trying to guess the one or two likely acquirers will oftentimes lead to a focus on metrics, products or methods that are not valued by other legitimate buyers. Yet, a well run, well managed company that shows growth and industry expertise is always of value to someone. Do what is right for your business and customers and don’t focus on one or two buyout candidates.
Retention speaks volumes
A potential buyer will be very interested in the retention rate of the customer base as well as the retention rate of senior managers and staff within your company. The former demonstrates the value of your product or service in the marketplace, the latter provides a level of comfort that even if you leave after the sale, the staff is experienced and dedicated to the business. That is extremely important to a buyer. Make sure that retention rates are part of your KPI’s (key performance indices) and that your strategic plans focus on increasing both.
Have a board of directors that provides real value
A potential buyer will always evaluate the expertise and experience of the founder and senior staff. However, they will be comforted to know that staff and founder were managed by a board that has deep business experience and took an active role in providing guidance. Knowing that an active board was present ensures that a start-up has the benefit of that experience and has probably avoided many of the start-up mistakes that can have a long term impact on the value of an enterprise. A smart board can help eliminate or reduce the “skeletons in the closet” that is the fear of any acquirer.
A clean balance sheet and a smart counsel
Nothing facilitates a closing more than a clean balance sheet and legal representation that is experienced in M&A work. Being able to provide clean financials for the past 3 years, or better yet financials that have been audited or at least “reviewed” by a qualified CPA again provides a high level of comfort that there are no “skeletons”. The added accounting costs for this type of return may be hard to justify at the time, but it can provide enormous returns at the time of a sale. An experienced M&A attorney who knows your company, your product and appreciates your culture and style is also a major asset in a sale. She/he can provide practical guidance on the enormous amount of material that will need to be prepared and when things get “difficult” (as they inevitably will during negotiations), you need the confidence to know they understand you and your goals and will always represent you in a manner of which you can be proud.
In summary, keep focusing on what is right for your clients and employees, have the metrics that show a focus on retention and surround yourself with smart people and don’t be afraid to ask for their advice and help. Good luck.
MVF Director and former Board Chairman, Matt Hoffner came to Maine in 1987 after 10 years as an engineer and manager for Exxon Corp. He was one of the original managers for Wright Express Corp. and was the Senior Vice President of Sales and Marketing for 10 years. He was then the founder of Integra Associates, a sales and marketing outsourcing company based in Westbrook, Maine with clients throughout the US. In 2000, he joined two other partners to start JobsInTheUS.com (JiUS), the parent company for JobsInME.com and fifteen other state-specific job boards. As President and CEO of JiUS, the company grew to become the largest job board in the Northeast and was sold to the Journal Register Corp. in 2006. While president, JiUS was selected as a top finisher in the “Best Places to Work” competition sponsored by the state HR association. Mr. Hoffner stayed on as President until July 2007. In October 2008, Mr. Hoffner joined with a partner in the UK to start Jobg8, Inc. an online marketplace for job boards worldwide. Mr. Hoffner was the president of North American operations headquartered in South Portland ME until May of 2013 and is now on the executive board and acts as a consultant for the parent company, Aspire media.