P+P+M=D: The Basic Formula A Buyer Applies Before Acquiring A Company
Rex Rossi
Business Broker and Exit Planning Consultant at Premier Business Group - Executive Director: howtosellmybusiness.com - [email protected]
Big Business, Small Business - It Doesn't Matter When Selling a Business - Understand What a Buyer is Really Looking For ...
Mr./Ms. Business Owner - Does Your Company Have It?
from:?Rex Rossi and?howtosellmybusiness.com:?A Chicago based Business Broker group and?M&A information website?dedicated to helping lower middle market and "Main Street" privately held companies improve the value of and achieve -?the successful selling of your company.
The Acquisition Formula all Business Buyers Apply:
P + P + M = D
People +?Product +?Market =?Deal
It works every time!
Mr./Ms. business owner, if you have accomplished People helping operate your company, produce a best in class Product?or Service, enjoy a well constructed position within your?Market?- then you have a?Deal?to successfully sell your company waiting to happen. Usually on favorable terms and on your conditions. This is the basic formula for a great company, a valuable company, and a company that many people will favor buying.
What about cash flow??Buyers will always covet and seek cash flow. That's the attention grabber, the qualifier, the first order of an acquisition, but in the end, after seeing how much money the business generates, they consider these three elements for a?successful deal. Yes, there are other important items, strategic fit, location, financing capability etc., but if you have a successful company (strong cash flow) and these three components?-?People + Product +?Market -?know there will be no shortage of interested buyers and a?Deal?is 90% of the way done, for everyone involved.
The Three Principal Elements Needed For Successfully Selling A Company
I. People:?The Infrastructure Managing and Operating Your Company.
The most important asset of a company, a quality company, are the people making it happen. To a potential buyer they instill confidence for sustainability and comfort in the ideas of future expansion. Senior Management, Operations, Sales, IT and Front Line Staff - this is the essence of a company. The why and how the doors open each day. Cherish superb employees, they will reward your company 10 times over by their work and the value they create for an enterprise. You, Mr./Ms. owner, will find that out when the time comes to sell.
Racine, Wisconsin's S. C. Johnson & Son utilized what people in Racine called "the golden handcuffs". Employees discovered that once S. C. Johnson had you, and wanted to keep you - the "golden handcuffs" came on and you wouldn't want to leave. Great compensation, wonderful benefits, exciting work life, the entire atmosphere being a part of this unique, international family business seduces managers and staff to stay.?And they do! -?Find a way to keep yours.
II. Product:?The Product/Service Quality Compared to the Competition and Possible Future Market Disruptors.
"Best in class" is always discussed, but it needs to become part of your company's ethos. A point of pride for everyone within the organization. Valuable companies have developed this culture.
Every day needs to become a new opportunity to pursue producing the best possible product or service.
A company that produces a great product or offers and provides a wonderful service will always be in demand. They are the gems buyers will look for and pay more to acquire. Why? These companies lead. They understand what separates them from the competition and they execute their model.
The larger the breadth and depth of your company’s separation from a possible competitor - the bigger a moat around your castle (the company) - the more value it brings to a suitor.
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Some components that help construct a formidable moat, that differentiates a quality product or service and distinguishes a great company from the crowd - include, but are not limited to:
Having as many of these components as possible - only facilitates an acquisition's success.
III. Market:?How You Are Positioned?
Where and how well is your company positioned in the market and how does it compete for business? Will there be a?there -?tomorrow? Is the company sustainable and the cash flow scalable after it is acquired?
When acquiring a business, buyers will apply a go-forward strategic plan that, if implemented and successfully executed, will lead to a business’s higher?future?value. Buyers will question and evaluate the following areas of the opportunity and if there, if executable - you got a deal!
The more positively a buyer translates these questions into an acquisition, the more considerable the price, and the easier to sell.
Equals = a Deal!
The above three elements, when together, sell a business 90%+ of the time. The experience of selling now becomes not whether the business sells, but at how much and under what terms and conditions you - the owner - would like!
When nearing the horizon of selling your company keep these three elements in mind, and if successful through time - in developing each - the more valuable, the more marketable and the better the chance of obtaining your dreams in?successfully selling?your business.
If you would like help on how to market and successfully sell your business,
Please contact directly:
[email protected] | 708.433.9410
[email protected]?| 708.433.9410
Founder and Executive Director -?howtosellmybusiness.com?
Senior Chicago Business Broker and Exit Planning Consultant: Premier Business Group.
Preeminent M & A Specialist to Privately Held Companies: Manufacturing, Distribution and Service Businesses in the Chicagoland, Midwest and National markets.
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