Attract buyers before you’re ready to sell No matter where your ﬁrm is in its life cycle, you need to think about how you might eventually sell it. If your business is relatively new, this may seem like putting the cart before the horse, but consider: The characteristics buyers ﬁnd attractive are also the ones that build a strong and proﬁtable professional services ﬁrm. And, when you decide you’re ready to sell, you won’t have to invest as much time or money to get it ready for the marketplace. But, before you even think of putting your ﬁrm on the market, you need to know what you want out of the deal. Know your mind To prepare your ﬁrm for sale, you must ﬁrst prepare yourself. Most owners don’t spend a lot of time thinking about what they want from a sale. The ﬁnancial rewards are only part of the deal. You also need to consider the functional, organizational and emotional aspects. For example, what role will you want to play in the newly acquired ﬁrm? How long will you want to continue working for the acquiring ﬁrm? Will you be able to accept being low(er) man or woman on the organizational totem pole? And can you start letting go of some of the long-standing client relationships you have built without fainting? Once you have a clear picture of these areas, you can negotiate harder for what you want and likely get a better offer. Understand what buyers really want Begin preparing your ﬁrm for eventual sale by thinking about what’s appealing to buyers, and then adjust your ﬁrm accordingly. Several factors are important to most acquirers: Steady growth. When expenses are in line with revenues, regular increases in the top line mean buyers can expect a good return on their investment. Diversiﬁcation. Generally, having several really good customers is preferable to having one major one. For example, buyers will look elsewhere if 30% (or more) of your business comes from one client. Proﬁtability. Buyers know that increased market share doesn’t automatically translate into higher proﬁts. They value a tried-and-true formula of careful cost control and wise investments that bolster the bottom line. Attract buyers before you’re ready to sell History of innovation. Professional service ﬁrms that demonstrate they can attract new clients or expand relationships with existing clients through new service offerings and skills can enhance your value. This includes enhancing organic growth through acquisitions. Niche player. Firms in specialized niches are more highly coveted than those that are good at many things. Generally, buyers prefer a targeted ﬁrm around which they can build bigger operations — or make additional acquisitions. Strong management. Buyers pay a premium for businesses that demonstrate they have quality leadership and relationship owners. Having such qualities assures the buyer that the client relationships, on which the purchase price is based, will likely remain in place and keep the ﬁrm growing after the buyout. Prepare to sell Because you invest so much time in your ﬁrm, you’re probably its greatest expert. But chances are most potential buyers are more experienced in and knowledgeable about buying a professional services ﬁrm than you are in selling one. You can, however, take steps to close this gap when you’re ready to sell. First, enlist the help of professionals — including attorneys, CPAs, and investment bankers or business brokers — with expertise in business sale transactions. Then talk to other business leaders who have sold their companies and can provide tips based on personal experience. It’s also important to build name recognition. If your ﬁrm name isn’t familiar, it’s harder to create a competitive bidding situation. But if your ﬁrm is viewed as a market leader, you can generate interest from multiple buyers and drive up bidding. Next, get your house in order. Make sure you have: Finally, know your ﬁrm’s weaknesses. Assume that any negative information will come out during the due diligence stage. So try to address these issues in advance. Attract buyers before you’re ready to sell Enlist the help of the pros No matter where your ﬁrm is in its life cycle, prepare now for its eventual sale. The characteristics that buyers ﬁnd attractive are the ones that build a strong and proﬁtable company, including steady growth, customer and geographic diversiﬁcation, a history of innovation and strong management. When you’re ready to sell, you can increase the chances of getting a good offer by enlisting the help of experienced professionals, building name recognition and understanding the business’s weaknesses. Ask the hard questions now Before speaking with a potential buyer, anticipate the kinds of questions — personal and business — they’ll ask and be prepared to offer a satisfactory answer. These include: special projects rather than day-to-day operations? Or do you have other goals that may require special considerations from the new owner? signiﬁcant staff expansion?
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