So You Think You’re Ready To Sell

by

Joan M. Ridley, CEPA, CBI, CFP™

Join the crowd. Over 60% of all privately held businesses are owned by baby boomers. So, there’s a real possibility that most of you want to slow down, work on your own terms, or bolt for the door as soon as possible. But here’s the thing. While you might be ready, your business might not be. What does that mean?

Based on Empirical data from national research from “Pepperdine Private Capital Markets”, nearly 40% of all businesses with 5m to $100m in annual revenues that reach a transaction fail. The other 60% deal with involve concessions (earn outs, value discounting, etc.) What’s worse, in the below $5m revenue market, the failure rate is as high as 80%

True, the market is awash with cash. Banks have cash to lend. Strategic and financial buyers have the cash and are ready to buy. So what’s the problem? Buyers are less than impressed by what they see. It seems that businesses are not being run with the purpose of creating real value. While they might be cash flowing well, they pose too much risk. Buyers will pursue a business if they think the business offers an opportunity for increasing sustainable cash flow. But if a business has not been managed to insure its future growth, it’s not worth the risk for buyers. The greatest reason for so many failures is a value gap between buyers and sellers. And this gap is always related to the found risk in a company that is depressing value.

The opportunity for private companies, therefore, is to identify, understand, prioritize, and address the risks in their businesses that would create the most value by their mitigation. In other words, to develop an internal Road-map for methodically strengthening their businesses by reducing the risks that are depressing value.

What kind of risk are we talking about? Well, there are nearly four dozen risks that fall into 8 different categories.  (Click on image below to see all risks.)

Risks That Impact Corporate Value

So how does your company stack up?

If company revenues are over $5MM, call us for a Value Opportunity Profile™ assessment (VOP). The VOP assesses a company across the entire enterprise, providing quality and risk ratings for 47 different categories, a baseline estimate of current business value, a detailed Roadmap of recommended initiatives to maximize future value, and a dashboard to conduct “what if?” analysis. The VOP assessment is designed to strengthen companies, prepare them for growth, and maximize long-term value. Call us today for a complementary meeting to discuss your Value Opportunity Profile.

 

Joan M. Ridley is a Certified Exit Planning Advisor, a Certified Business Intermediary, and a Certified Financial Planner™. She is President of Business Wealth Solutions, a business consultancy that helps business owners maximize value and plan for ownership transition. In 2013 she received the first Excellence in Exit Planning Award conferred by the Exit Planning Institute for her pioneering contribution to this new discipline. Please call us for more information at 214-692-9192 and visit www.bwsllc.net

Copyright 2013 Joan M. Ridley