How an Advisor Helps Business Owners to Maximize Value When Selling
It’s easier to have success when you’ve done something before.
That’s the idea behind the entire concept of “practice”: by repeating an activity, you can improve performance. Malcolm Gladwell famously hypothesized that 10,000 hours of deliberate practice are needed to become world-class in any field. While the exact metrics are up for debate, the principle, on the whole, is not.
That principle may be most easily applied to improvement in physical skills – musical or sporting performance, for example – but it’s just as aptly applied to intellectual pursuits, too. In fact, David C. Baker posits that all intelligence is founded in pattern matching. Consequently, people are more likely to succeed when they frequently interact with similar patterns.
Here’s the problem: most people don’t buy and sell businesses often.
So, when the time comes to sell a business, many business owners are moving through a high-risk process that requires high-level expertise for the first time. And, while experience often leads to success, inexperience often leads to failure – in this case, bad deals, poor returns, and personal regret.
The solution is to work with someone who is familiar with the process: a guide that has identified the patterns and the pitfalls and can put expertise into practice to bring about better success. In such a high-stakes endeavor, business owners shouldn’t have to “go it alone.”
With that in mind, here are three ways that an advisor can help business owners to maximize value when selling. Note: they’re all predicated on experience.
1. An advisor can evaluate (and help to improve) your business.
Unless you’ve bought and sold many businesses, it can be difficult to accurately gauge the value of your company. Hopefully, you know the foundational numbers: revenue, margins, expenses. But valuations quickly get complex.
How valuable are your assets – your equipment and your facility? Have you accounted for depreciation? Could repairs or renovations improve value? How should your labor force be evaluated?
And then, importantly, what multiple should you be asking for? What is the industry standard? What factors are considered in shaping that standard – and how does your business perform in relation to them?
If you’re seeking to answer these questions for the first time, you’ll have a high chance of coming to the wrong answers. Unfortunately, the wrong answers can lead to the wrong deal, or at the very least, lead to leaving money on the table.
Good advisors, on the other hand, have asked these questions before, and understand the processes involved in uncovering the right answers. In fact, ideally, not only can they uncover the answers, but they should also be able to help you improve your relevant business measurables, and so position your company in a way that maximizes its value.
2. An advisor can evaluate the market.
Evaluating a business is one thing – evaluating the market for a sale requires an additional layer of expertise.
As we’ve written before, there are certain contexts that make opportunities more favorable. For example, if there are several multi-location operations competing for share within a regional market, it makes sense to capitalize on that competition by positioning the business for competing bids; alternatively, if no consolidation has happened in a region, there may be a way to capitalize on the value of first-entry – and so on.
Of course, in order to take advantage of market contexts, it’s necessary to have experience in navigating different markets. Most business owners don’t, and so risk positioning their businesses poorly.
Advisors, on the other hand, do. This experience can be put to use to identify favorable opportunities, and, from there, negotiate favorable terms.
3. An advisor can navigate the deal.
Finally, in addition to providing accurate assessments of the business and the market, advisors can help to ensure that business owners navigate the deal successfully.
The logistics of a merger or acquisition are complex, and getting the best return necessitates understanding the terms in the first place. How do advisors help? Put simply: they speak the language.
What will become of the brand name? Current employees? Assets? Should the business owner pursue a transitory role during the acquisition process? Over what timeframe will the sale be realized?
In a worst-case scenario, business owners sell without fully understanding the terms of the deal, only to realize that they didn’t get a fair return. Working with an advisor alleviates that worry. Advisors can use their experience to make sure that business owners get the result they want.
Get the Power of Experience on Your Side
It’s easier to have success when you’ve done something before. That’s why working with an advisor leads to better results.
At Kingsmoor Advisors, we’ve done this before.
Over more than 30 years, we’ve completed over 100 transactions totaling over $5 billion.
We’ve successfully navigated the process again and again, allowing us to identify the factors that lead to success from both sides of the table: we’ve bought businesses, which allows us to strategically approach engagements from a buyer’s perspective, and we’ve sold businesses to maximize returns.
Are you considering selling your business? You don’t have to go it alone – and, if you want to ensure the best results, you shouldn’t.
Get the expertise you need to add clarity to the process and improve the return. Let’s set up a time to talk.