Maximizing Your Multiple, Part 2
Updated: Jun 12
Preparing your business to maximize its value when it’s time to sell is a process. Our proven 4P Method can lead to higher valuations and better deal terms.
STEP THREE: The Sales Price We focus on deal terms to get you the maximum value for your business ̶ and get multiple offers to help bid up the price.
Nobody wants to leave money on the table because they don't know how to negotiate the best deal terms. And no one wants to spend hours with the wrong buyer.
We vet buyers as quickly as possible, to weed out those only willing to put in low-ball offers or who are unqualified to purchase.
A couple of terms that can get sticky in negotiations if you don't know what you're doing are: net working capital (different buyers often define this differently) and inventory.
Buyers often discount the inventory value based on what they consider obsolete. Or they may not include shipping costs or labor added after the product was delivered, thereby lowering the value.
One company we worked with thought they'd gotten a $7 million offer from a strategic buyer. But once we looked closer, the offer involved having the seller leave $5 million in net working capital in the business, making the offer really only $2 million.
Without a careful understanding of the terms, this business owner would have netted far less than he expected.
STEP FOUR: Passing the Torch Sellers often say, "Once I get the money, who cares?" But most deals have payments after close, whether it’s a holdback, a seller carry note, or an earn-out. You want the buyer to be successful, so he can make those payments.
Also, you need a good transition plan, so all of your suppliers, taxes, payroll, and other expenses get moved over to the buyer and you can cleanly exit. And most importantly, you don't want any kind of post-close lawsuit. We work with sellers throughout the deal process to minimize this risk. We want to be sure the right processes and procedures are in place for an easy transition, that you’ve fully disclosed any potential issues, and that the legal documents properly protect both parties.
You want to leave a lasting legacy. Most sellers want their legacies to live on. If you've worked this hard to build your business, don't you want it to continue to grow and thrive and to continue to have your employees, customers, and suppliers taken care of?
We work with sellers and buyers to set up the deal, to help ensure employees, customers, and suppliers are motivated to continue to work with the buyer.
In some cases, that means setting up contracts or bonuses post-close. Mostly, it means having a good communication plan for the transition.
However, the most important aspect is picking the right buyer. You want someone who is a good cultural fit and who you believe can succeed. We work with our clients to ensure the transition goes as smoothly as possible. The four key takeaways:
One, a consultative broker with a proven system minimizes the risk of sabotaging your sale.
Two, the devil is in the details. The fine print can cost you hundreds of thousands of dollars.
Three, taking the time to prepare can double your sales price and prevent having to take the business back in terrible shape.
Four, our 4P method has produced successful sales for dozens of owners at a maximized multiplier.
You have a choice. Try to do it on your own, which can be very risky and costly, especially if you've never sold a business before. Or use a consultative broker. In our case, we use our proven 4P Multiplier Maximizer method to get the highest value for your business.
For a free exit strategy session, contact us. Prepare your business for sale and maximize its value by leveraging our proven 4P Method, focusing on maximizing your multiple. Contact us to learn how to increase the worth of your business when it's time to sell.