Maximizing Value of your Business for a Liquidity Event

Began business with a vision of tangible accomplishment.
1. Cash flow to support a future lifestyle
2. Accomplish goals with special and nimble approach which others are not
  1. Large company – bureaucracy
  2. Political stalemate in existing company – family or deep bench to work through.
  3. Idea of technology or new business process that can change a market
  4. New technology for old problems – changing of the guard.
3. To be in charge or impact decision of the company
4. To feel direct response from:
  1. Accomplishment – results
  2. Risks – rewards
  3. Vision – achievement
Experience business grow through stages from:
1. Start up
2. Early achiever
3. Business with momentum
4. Profitable/growing/well run
5. Mature and limited by either capital, management or age of management.
Have arrived at a point where financial rewards of sale out way compensation concerns.
1. Transition to next stage managers
2. Bring in new capital
3. Bring in expertise to go to next level
Goals to maximize value
1. Demonstrate history of earnings increases and/or stability.
  1. Ability to manage through cycles with modest impact to earnings.
  2. In down times, cut back quick enough to protect cash flow.
  3. In up times, saw the opportunity early and maximized opportunity.
2. Strong % of recurring revenue vs. episodic revenue
  1. Long term contracts services
  2. Maintenance or other fees to connect customer
  3. Predictable revenue better than, must create new customers every day.
3. Avoid or settle contract disputes or litigation prior to sale.
  1. Buyer will always protect for worst case.
  2. Any uncertainty makes deal harder.
4. Clean up and eliminate non-essential core business expenses in the business.
  1. Private companies run personal expenses through business.
  2. Larger companies may have executive perks built in – cars, planes, boats, benefit products.
  3. Buyer wants to buy recurring EBITDA, and easier to understand / more valuable.
5. Build and incent your management team
  1. Buyer can continue business at high performance level – more desirable.
  2. Confidence management will continue drives value
  3. Transition or employment contracts can help.
6. Examine and eliminate uncertainty
  1. Products sold or vendors used (healthy)
  2. Customers, continuity, concentration and payment history – all important
  3. Regulatory or industry movement – understand what’s going on to impact short term future of business.
7. Seek expertise and counsel to sell
  1. Legal counsel – experienced in M&A – making deal happen.
  2. Tax advice – sale of a business is complex tax issue. Know your options ahead of time.
  3. Broker / Investment Banker – frequently they can find more and better buyers than you.
  4. Family office wealth manager – once you are liquid you need to structure your family finances – organized, planned and tax efficient.