Value Creation Actions that Work

Operational Actions That Transform Value. You can't "exit plan" your way to a saleable company!

It’s very tempting to compare the buying and selling of houses with businesses. Be careful. For example,buying another business is like buying a house but only if you include the family inside it!

Selling a business is similar to selling a house in some ways, such as the importance of preparation in securing a good price. However, many businesses are put up for sale before they are fully prepared, which can negatively impact their value. It’s essential to scale and professionalize your business, build a strong team, and focus on key aspects of your business over several years. Doing so will make your business more valuable, whether you sell it or not.

So here is the Road map. As suggested, the Saleability Test is a great place to start. You are looking for weaknesses through the lens of a buyer. Remember it’s the buyer that perceives value in your business. All you can do is aspire to price. Keep in mind that only around 6,000 out of 6.1 million businesses registered in the US Census Data exit at $10 million or more, so the odds of a successful sale are not great. To prepare your business for sale, create a 100-day action plan to methodically tackle key agenda items. These can include:

1. Repositioning:

• Revisit the fundamental business you are in.
• Reevaluate your target audience.
• Develop concept statements that represent your current positioning as well as several new alternatives.
• Evaluate them for market potential, differentiating qualities, believability, and relevance.
• Examine your competition, unique skills, and value proposition.
• Define the exact set of activities that will allow you to excel in a specific market, one in which you can become a global player over time.

2. Marketing:

• Ensure that your current internal and external marketing communications align with your positioning. Define the voice of your company – the unique narrative that will be remembered by prospects and motivate them to act
• Identify the pain points that your prospects are feeling.
• Craft a compelling story that explains how your service addresses those pain points.

3. Sales:

• Define a comprehensive sales process that aligns your messaging with sales scripts. This will help you have meaningful conversations with prospects.
• Train sales professionals to adopt a business-like tone, quantify the costs associated with problems, and identify signs of live issues with serious consequences.
• Educate your sales team to be curious and aware of a prospect’s world and to speak in their language.
• Develop engagement strategies tailored to each customer/prospect to establish stronger connections between your offering and their improved performance.
• Focus on speaking with the right person at the right account to increase your chances of success. Sales professionals should see themselves as career builders and understand how their offering can address the challenges of their prospect’s role (e.g., a CMO). Understand the “need behind the need” by continuing to ask questions until you reach the core issue. Consider the client’s client as well.
• Building a business case is more effective when you measure the cost of the status quo rather than just the positive ROI of your product. However, research from the book “JOLT”, shows that prospects are more concerned about making mistakes than missing out on opportunities.
• Agonize over how you phrase questions to engage prospects and avoid sounding too salesy. “What are the ripple effects of “a specific” challenge to your business?” is far more powerful than “how does that impact you?”
• Stay informed about changes in the industry and in the prospect’s business, as this can make or break the deal. Start every call with “what’s changed since we last spoke?”
• Tailor your approach to discovery calls based on whether the deal is inbound or outbound. With outbound deals, start with a brief narrative about how you can solve market pain and then ask about their specific challenges.
• Sell the hell out of next steps. Don’t assume your buyer will show up just because they showed up to the first call. Clearly explain the WHAT, the WHO, and the WHY of the next step you’re proposing.
• Listen carefully to what the buyer is saying and ask follow up questions based on their responses to build a stronger relationship. The best questions are not pre-planned but are based on the buyer’s input. LISTEN.

4. Products:

• Ensure that your product portfolio aligns with your positioning.
• Bring together the right people in a continuous cycle of innovation to build top-notch products. Foster a culture of continuous improvement within your business that is always challenging itself to stay ahead of the curve.
• Adopt a DSMO approach to product development and launch by aligning Development, Sales, Marketing & Operations to ensure the product or service is market-ready on the launch date.
• Build a new innovation approach by aligning development teams with marketing, sales, and operations teams. This guarantees that the whole company is prepared for every product/service launch, including the post-launch integration into your systems.

5. Talent:

• From PepsiCo to Meta to local world-class players that are not household names; the problem of talent acquisition and retention is huge. To improve your odds in the Talent War, create a series of low-cost actions.
• These tactics could include: creating internal universities to train your workforce, designing innovative incentive schemes, and building new organizational structures that focus on driving projects instead of departments.
• Additionally, develop a new approach to recruitment that allows you to capture the best talent when you need it. Always be recruiting for your bench.

6. Metrics:

Thanks to today’s technology, we can now measure numerous key

performance indicators (KPIs) quickly and accurately, something that was only a dream a decade ago.

• Use data visualization technology to keep track of your essential KPIs, stay focused, and up-to-date.
• Remember that who you are is what you measure, so clearly define your positioning and create a set of financial and non-financial KPIs that measure the right stuff.
• By building on your existing metrics, you can create an enhanced reporting system that generates clear actions required. Doing so allows you to monitor the signals, keeping management agile and alert.

7. Business Models:

• When considering an acquisition, buyers prefer companies with a stable and consistent revenue and profit stream.
• Therefore any business model that aims to maximize exit value should focus on achieving predictable sales and earnings growth.
• Examine the various ways of bringing your product to market and assess the economics of each approach.
• Even if you have no plans to sell your business, secure investment, or obtain long-term financing, building a more reliable business has no downsides.
• Continuously review, test, and improve your monetization strategies, from simple contract improvements to entirely new business models.

8. Operations:

When selling a business, potential buyers will consider a variety of factors related to the company’s operations.

• Safety: Buyers will want to know that your business is operating in a safe environment for both employees and customers. You should have safety protocols in place and provide documentation of safety inspections and training.
• Environment: Environmental concerns are becoming increasingly important to consumers and investors. You should have policies and practices in place that minimize the environmental impact of your operations, such as waste reduction and energy efficiency measures.
• Sustainability: Buyers will want to see that your business is sustainable in the long term. This includes measures to reduce costs, increase efficiency, and minimize waste. You should be able to demonstrate that you have a plan for continued growth and development.
• Health: Health concerns have been brought to the forefront due to the COVID-19 pandemic. Buyers will want to see that your business has policies and practices in place to ensure the health and safety of employees and customers.
• Manufacturing or Service Operations: Buyers will want to understand the manufacturing or service operations of your business. This includes factors such as supply chain management, inventory control, and quality control. You should be able to demonstrate that you have a well-defined process for delivering your products or services to customers.
• It’s important to be transparent about your operational practices and provide documentation to back up your claims. By demonstrating that your business is operating efficiently, sustainably, and safely, you can increase its value and make it more attractive to potential buyers.

9. Capital structure:

• Examine your capital structure and ensure you have the necessary funds to execute your plan.
• Review your budget and determine what you need to fund the business.
• Are you funding the long-term needs of the business with short-term capital?
• If you are, this implies you need to recalibrate your plans and bring in an external equity partner.

10. Risk:

• Conduct a risk assessment to ensure you’re agile enough to handle changes.
• Review the material risks within your business using SWOT analysis and scenario planning.
• Develop a strategy to mitigate risks, whether they relate to financial matters, succession issues, contract exposures, customer dependencies, internal control gaps, accounting treatment, or forecasting ability.
• Establish simple processes to ensure compliance, regulatory, and control issues are addressed in day-to-day business operations.
• Regularly conduct a Saleability Test?, preferably every six months, to assess your progress in building value. Evaluate whether your index has gone up and whether you have addressed your weaknesses. Determine if you are working on the business or in the business. By measuring this index periodically, you will gain valuable insights into your ability to build value.

These Value Creation Tips are extracted from our complimentary Exit Playbook published last year. Download your copy today.

The Portfolio Partnership are a Value Creation Team. We build businesses buyers love to buy. If you would like to chat, ping me at [email protected]