Selling Your Business? Don’t Leave Money on the Table

(also published in Crain's Chicago Business: https://www.chicagobusiness.com/chicago-booth-insights/selling-your-business-dont-leave-money-table)

Six ways to maximize the value of your business?

For entrepreneurs who built a business from the ground up, selling it is a defining milestone. Years of sweat and sacrifice boil down to a single event. But many founders who haven’t properly prepared get shortchanged?

A sobering reality is that most businesses either sell or fail.? Very few IPO.?Since a sale is the most likely positive outcome, you can create huge value by planning early. Businesses that are ill prepared can either fail to sell or sell at a much lower valuation — giving up 10%, 20% or even 30% of the potential price. If you’ve spent 10 years building your business, that’s like throwing away three years of hard work. To maximize your company’s price, you need to minimize the buyer’s risk and maximize your value to them. Here are six ways to do that:

Enhance Your Key Talent

Be honest with yourself about your team. Sometimes the folks that got you here are not the folks that will take you to the next stage.? Upgrade key talent as you scale, and put in place talent risk-mitigation strategies like succession planning.?

Architect Your Product for an AcquisitionThink beyond your current offering to how an acquirer will integrate what you’ve built. Consider creating some of that connective tissue so that they can envision you as part of them. Build ecosystem relationships, including co-development and cross-selling..??

Align Your Operations and Business Model

Mature your operations and business model to align with a natural buyer. Develop operating models, internal language, standard practices and organizational structures that mirror the way a natural acquirer talks about and runs their business.??

Fortify Your Technology

Make sure that your technology is built on a safe foundation so that it can scale to the growth plans of an acquirer. It needs to be well documented, built using best practices, and architected to industry standards.

Leverage Your Client Relationships

Make your client relationships a valuableasset by driving multi-year terms in contracts (making them stickier), and ensuring your legal documents allow for a change in control. Show clients how your offering ‘fits’ into a broader solution that could include a buyer.

Create a Plan … Now

You can’t predict the timing of a sale, so start thinking about an M&A outcome early and make a plan years in advance.. Many opportunities are driven by market trends, new technologies, client needs, and other variables out of your control.??

Preparing your company for a sale is a force multiplier that can enhance the value of your life‘s work at a relatively low cost, in the same or greater way that sales, product management and cost control have done for you.