Once upon a time, there was a successful business. The owners built it up, nurtured it, and poured their hearts & souls into it. Then, it was time to monetize.
The owners looked around for a buyer and tried to figure out how to get the most out of this successful business. They figured that they knew the value of the company and would get that value.
But the owners, like 70% of owners with successful businesses, failed to sell. They failed to sell because they could not demonstrate that their company was significant as well as successful. Please allow me to explain this concept.
To become significant, a company must do two things:
1. Become a VERB
2. Build the 3-legged stool. Once you have completed these two things, your business will move from successful to significant.
Here is what I mean when I say a company is a VERB:
- Valuable. In the eyes of the buyer, there is real value. This value could be synergistic, competitive, growth, staffing, goodwill, income…whatever the buyers are looking for, and are willing to pay for.
- Enticing. Is your business “shiny” in its space? Are the price and terms in line? Are buyers drawn to you? What are the growth prospects without you at the helm?
- Ready. Are you personally ready to make the move? How about your family? Are your employees, vendors, customers, and other stakeholders ready?
- Buyable. Is it ready to be transferred? Are your ducks in a row? Is your technology able to survive the transition? Can the balance sheet take a punch? Are all legal and tax issues thought through?
It is important that you have these things in order well before the monetization event. You want the company to be ready for unsolicited offers as well as solicited offers.
A buyer also finds the company more attractive if the seller’s personal ducks are in a row. Nothing kills a deal faster than being unprepared! Here is what YOU need to do to be prepared:
Make sure the “3-legged stool” is set up and stable. I use this analogy because we all know that a stool is not functional if it doesn’t have 3 adequate and balanced legs. Likewise, with your business, you need to ensure that your business, family, and personal goals are all aligned to support a sale. This is where you spend time with your financial advisor to fine tune things. It is important to know what you want from the sale.
Do you want:
- Fastest sale?
- Most after-tax money?
- Sell to the kids/ employees? (can they afford it?)
- Stay away from a competitor?
- Highest dollar amount?
- Enough to retire on, or start another business?
Without knowing what you want and need, your 3-legged stool is not set, and your monetization will be difficult, if not impossible.
You will go from successful to significant when your business becomes a VERB, and your 3-legged stool is set. When you are significant, you will get the most from the monetization; the process will be smoother, and you will retain the most control.
Here at Prosperity Advisors, we are the intersection of business and family. We specialize in helping you go from successful to significant. Give us a call!