Do you know the five things that will lower your company valuation when it comes time to sell it?
Most business owners should know these not-so-fabulous five things but don’t.
In the world of mergers and acquisitions, when it comes time to sell your company, you have one chance to get it right.
In both life and business, success comes from doing more of what works and less of what doesn’t work.
Is success in the world of mergers and acquisitions that simple?
Yes.
Who am I, and how do I know?
I was that kid who started his eLearning company right out of school with no money, experience, or team.
The truth is, I had no business being in business, and the results showed.
My grit and passion kept me in the game long enough to experience success. With success came an unsolicited offer from a smart and experienced buyer.
The buyer, more like a wolf in sheep’s clothing, gave a 7-figure offer based on three times EBITDA.
When I said “no” to the offer, I was saying “yes” to mastering the art and science of selling a business.
Two years later, I said “yes” to a different buyer with a 9-figure offer based on 13-times EBITDA.
Despite having the same offering and team, my company valuation increased 10X.
How did I increase my company valuation 10X?
Keep reading to find out.
Say Goodbye To A High Company Valuation When You Say Hello To Dubious Financial Records
First impressions never have a second chance – Charles R. Swindoll
In mergers and acquisitions, first impressions can make or break your company valuation.
Do you know the quickest way to create doubt and uncertainty in the mind of your future buyer?
Provide unreliable financial records.
The business of selling a business is a zero-sum game.
Buyers hope and pray that you make mistakes.
Read and prosper from “Do You Know The 7 Mistakes Every Buyer Wants You To Make When Selling Your Business?”
Every mistake you make lines your future buyer’s pocket with your hard-earned money.
Unreliable financial records lower your company valuation and may cost you the deal.
From the perspective of the buyer, if your financial records are wrong, what else is wrong?
In the merger and acquisition world, your currency is trust.
Unreliable financial records break the trust with both the buyer and investment banker.
If you think that you can correct your financial records and find another buyer, think again.
You’ve lost the trust of your investment banker and will need to find another one.
If you want a high company valuation, your financial records must be beyond reproach.
As good as your accountants are, they depend on the information you provide. In other words, clean up your act, starting today.
Your future buyer is smart and experienced. Be smart and have financial records that are clean and accurate.
Do you know the next factor that lowers your company valuation, at best, and may even cost you the deal at worst?
Keep reading.
Why A High Reliance On A Single Customer Creates A Low Company Valuation
Work out your own salvation. Do not depend on others. – Gautama Buddha
In today’s global economy, it’s common to work with large multinational businesses.
In the blink of an eye, you have national distribution. Revenues take on the shape of the proverbial hockey stick.
Your company goes from zero to hero.
Life is good, right?
Not so quick.
Do you want to know the quickest way to create a low company valuation at best, or cost you the deal at worst?
Your business has a high reliance on a single customer.
Depending on a single customer for the majority of your profit is a disaster waiting to happen.
Put yourself in the shoes of your future buyer.
The one customer that drives the majority of your profits can be here today and gone tomorrow.
Company valuation aside, relying on one customer prevents a market disruption.
Read and prosper from “Why You Need To Create Market Disruption To Lead, Succeed, And Prosper.”
When it comes to customers, there’s strength in numbers.
The more customers you have, the less reliance you have on any single customer.
While customers come and go, your profits and your longevity remain intact.
Do the right thing for your business when seeking a high company valuation. Ensure your profits are not tied to one customer.
The dependence of your business in certain areas will drive a low company valuation.
Do you know the next area that drives a low company valuation?
Keep reading to find out.
Do You Know The Quickest Way To Create A Low Company Valuation? Your Company Doesn’t Run Without You
None of us is as smart as all of us. – Ken Blanchard
Do you know one of the first questions your future buyer will ask?
The question is this: does your company run without you?
Read and prosper from “Why You’ll Be Happier And Richer When Your Company Runs Without You.”
So, does your company run without you?
If your answer is “no,” you’ve set yourself up for a low company valuation.
Why?
Your future buyer has one question that will make or break your exit.
The question is when you’re no longer around, will your company still thrive and prosper?
Most business owners take pride in knowing that their business revolves around them.
Yes, you were the genius who took the risk and started your company. Your sleepless nights, passion, and grit created something out of nothing.
When your company doesn’t run without you, you’re doing a disservice to you and your future buyer.
When your company runs without you, you achieve three things:
- You get your time back and welcome the lifestyle you’ve dreamed about for years.
- When you step aside, you create upward mobility for your employees. You can now keep and attract top talent.
- Your extra time allows you to find new markets, solve new problems, and grow the company.
You create a win-win-win when your company runs without you.
Your company thrives and prospers, which in turn, creates higher profits.
Higher profits add more value to your company.
The bottom line is the bottom line. If you want a high company valuation, ensure your company runs without you.
Next up, do you know why teamwork makes your dream work and helps you create a high company valuation?
Keep reading.
Do You Know Why Your Exit Team Will Make Or Break The Sale Of Your Business?
Show me your team and I’ll tell you your future – Jeffrey Feldberg
Your exit team can make or break your company valuation.
If you’re new to the world of mergers and acquisitions, you may be wondering what is an exit team and who is on it.
Read and prosper from “Assembling Your Exit Team? How To Crush It And Win.”
Most exit teams consist of:
- Investment bankers
- Mergers and acquisitions lawyers
- Accountants
- Tax advisors
- Your top management members
- Key customers
There is one other exit team member that is often overlooked.
A Chief Exit Advisor is an advisor to the advisors and is loyal to you. Look for an individual who has a successful track record of selling companies.
As an advisor to the advisors, your Chief Exit Advisor helps you avoid common mistakes.
Your company valuation will change during your exit process.
What lowers your company valuation is when your exit team does two things.
First, your exit team is slow to respond to the buyer’s request. Second, your exit team provides inaccurate information.
Conventional wisdom is wrong. Don’t believe for a moment that your company valuation is a formula in a spreadsheet.
Buyers often come up with a company valuation based on emotion first and justify it later with logic.
Know you know why your company valuation is as much art as it is science.
Do you want a high company valuation?
Ensure your exit team shares your vision, is quick to respond, and accurate.
Your buyer will respond in kind when coming up with your company valuation.
Speaking of buyers, do you know the one thing that sellers miss the mark on when it comes to company valuation?
Keep reading.
For A High Company Valuation, Know Your Buyers’ Motivations Better Than You Know Your Own
We are surrounded by data, but starved for insights – Jay Baer
The sad truth is that when it comes to buyers, most sellers only care if the check clears.
If you want a high company valuation, you better know the motivations of your future buyer.
Your business is successful because you solve a painful problem for your customers. Your customers are only too happy to pay you to take their pain away.
Why would it be any different for your future buyer?
Your future buyer is looking at your company to solve a painful problem.
For a high company valuation, start by knowing everything about the buyer.
The motivations differ between financial, strategic, and family office buyers.
From the start, know the type of buyer that’s sitting across the table.
Your investment banker is a great resource to help you find out the motivation of your buyer.
To be blunt, the more you know about the motivations of your buyer, the higher your company valuation.
Why?
Knowing the motivation of your buyer allows you to customize your pitch for the buyer.
The more you show your future buyers how you can solve their pain, the higher your company valuation.
What do you think happens when buyers know why you’re the best company in the world to solve their problems?
Your company valuation increases.
When it comes to your company valuation, be smart, and know the motivations of your future buyers.
Conclusion
Do you know the five factors that will lower or increase your company valuation when it comes time to sell it?
Most business owners should, but don’t.
In the world of mergers and acquisitions, you have one chance to get it right when selling your company.
Who am I, and how do I know?
I was that kid who started his eLearning company right out of school with no money, experience, or team.
The truth is, I had no business being in business, and the results showed. My grit and passion kept me in the game long enough to experience success.
With success came attention to my company. A savvy buyer gave me a 7-figure unsolicited offer based on three times EBITDA.
In saying “no” to the unsolicited offer, I said “yes” to mastering the art and science of selling a company.
Two years later, I said “yes” to a different buyer who gave a 9-figure offer based on 13-times EBITDA.
My company valuation increased 10X even though it was the same company.
Today I help business owners grow their business, sell their business, or both.
When you master the art and science of selling your company, you level the playing field. As important, you prevent yourself from getting ripped off by sophisticated buyers.
Start your journey by mastering the five things that increase your company valuation.
What do you do, and where do you start?
Start with the first principle and stay with it until you master it. When you’re done, move on to the next one until you’ve mastered all five principles.
You can do it. I know you can.
Here’s to you and your success!
Your Biggest Raving Fan,
Jeffrey Feldberg
Today, Feldberg's passion is helping you extract your deep wealth. The 90-day Deep Wealth Mastery program helps create a solid foundation for three areas: increasing profits to enterprise value and optimizing post-exit life. Deep Wealth Mastery offers strategies and insights drawn from Feldberg's rich experience. The strategies from the trenches get results. Jeffrey's vision is to increase the social fabric of society one entrepreneur at a time.
Learn more through https://iapdw.com/prosper
- The No-Compromise Startup Strategy Fueling Happy Wolf’s Rise As The Go-To Kids’ Snack Brand
- The Intersection Of AI And Investing To Level The Playing Field: A Conversation With Andrew Einhorn
- Entrepreneur And Coach Scott Maderer Shares The Blueprint To Success Through Your Time, Talent, And Treasures
