Working In The Business vs. Working On The Business
By J. Tyler Thompson, CFP®, CEPA®, AAMS®, WMS®
Too many entrepreneurs allow themselves to get sucked into the tyranny of urgent tasks and demands at work each day — a few more emails, one more phone call, one more meeting.
Focusing on the daily grind and being productive is important, but as you begin thinking about potentially selling your business, it’s crucial to step back and take a critical look at the health, growth and competitive strength of the business.
In other words, in addition to working in the business, you must also be working on the business.
A potential buyer is going to find the business far more attractive and valuable if there is a strong management team in place with clearly defined goals for growth and a strategic vision for achieving those objectives. Conversely, a prospective buyer may lose interest or negotiate the purchase price lower if they believe the business cannot operate or thrive without the current owner.
It’s important to be able to demonstrate that you have systems in place to do sound business planning and financial forecasting, along with a continuity plan that demonstrates an ability to anticipate and recover from disruptions.
Must Haves
Deep bench strength on your senior leadership team is essential. You should also be able to show that you have a robust retention program to ensure you attract and retain the best talent, as well as internal training or upskilling programs that keep your company on the path of digital transformation.
A favorable competitive stance in a crowded marketplace is key. You should have a strong pipeline of innovation projects, consistent investment in research & development and other big picture advances that will ensure future growth.
Weakness in any of these categories can get you pigeonholed as a lifestyle business, which can diminish the value a prospective buyer places on your company.
Protect Your Future Valuation
A disconnect between the buyer’s and seller’s opinions of value is the biggest obstacle to a sale or transfer, according to 95% of professionals surveyed by the Alliance of Merger & Acquisition Advisors.
Don’t become another statistic. Consider engaging a Certified Exit Planning Advisor® to help strengthen your business and close any gaps that may exist.
The time and energy spent on a critical assessment of the health of your business is an investment in your future exit valuation when you decide the time is right to sell.
Any opinions are those of J Tyler Thompson and Capitas Advisory Group and not necessarily those of RJA or Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete