You spent a lifetime making mistakes and learning how to be successful in your chosen field or industry. Through trial and error, you learned how to monetize your business and establish your brand in the marketplace. Revenues and profits are stable and you may be thinking about the next step for your company – either succession to the next generation or a liquidity event.
But do you know how to position your company to sell for highest value or ensure that a succession plan will go smoothly?
Entrepreneurs are experts at building, nurturing and structuring their business.
The skills, expertise and knowledge required to start and build a business are well known. You analyzed the market, developed a product or service to meet the needs you identified, then you took deliberate, calculated steps to bring that service or product to market. The focus of your efforts was on growth, market expansion and profitability.
But what worked during the growth stage may not be what private investors or capital managers look for in their next investment.
It normally takes 1-3 years of focused, deliberate attention to groom a company to withstand a stringent due diligence review by a potential investor or buyer. During this transition stage, a different mindset and perspective are crucial to the ultimate success of the company.
The Transition Stage requires a Focused, Deliberate Process
When your company is in the transition stage, the goals, focus and strategies are different than during the growth phase. It makes perfect sense, because you are now moving toward a new destination. The mindset, skills, knowledge and expertise that are critical during the growth phase of any business must shift when the company enters the transition stage of its evolution.
You should be as methodical and strategic in the transition process as you were during the growth and expansion of your business. When you utilize time tested, proven methodologies to ensure that your business is ready for a due diligence review, you, your shareholders and your successors will reap the rewards.
If Your Company is Family Run, it must Transition to Professionally Managed
Many entrepreneurs who start their own business rely on family and friends to help run various departments or operations. The company growth and expansion is due largely because of the dedication and hard work of the founders and core personnel. But at some point, if the business is going to expand into the next level of growth, professional management standards become necessary.
Professional management procedures and processes focus on consistency, accuracy and reliability. By definition, those practices will continue to function after a change in ownership. What happens after the sale or succession event is more important to investors than the current status of the business.
Five Critical Areas Inside Any Company that Should Exhibit Best Practices
Any business, no matter what the focus or industry, has five critical areas that support the business model. If any of these areas are not running effectively or efficiently, it can impact the overall health and viability of the company. The five areas include:
When a prospective buyer conducts a stringent due diligence review before making an offer, if one of these five areas are substandard and not professionally managed, the highest value placed on the entire company is jeopardized.
For example, a potential buyer will automatically devalue a company if it does not have professional financial reports available on a timely basis. If there is a lack of consistency in the sales process, a potential investor may not have the same confidence that sales will continue after the capital injection is made. If there is a pattern of claims or lawsuits from vendors or customers, succession of the company to the next generation may be jeopardized.
By introducing best practices in each of the five areas, inefficiencies can be reduced, scalability increased and consistency in performance assured. The end result is increased stability, consistency and growth, which directly impacts value.
Doesn’t your life’s work deserve the effort necessary
to transition to the best and highest result?
Your company is the product. Growth to Exit® is the process. The Buyer is your customer.
THIS INFORMATION IS FOR GENERAL INFORMATION ONLY. IT SHOULD NOT BE CONSIDERED LEGAL ADVICE AND DOES NOT NECESSARILY REFLECT THE OPINIONS OF TSG PUBLISHING. YOU SHOULD NOT ACT ON INFORMATION RECEIVED FROM GROWTH TO EXIT® WITHOUT FIRST SEEKING ADVICE FROM YOUR LEGAL COUNSEL.