Business owners are a driven group. They’ve grown their company because they’ve focused on a goal; they’re able to find good people to help them; they’ve developed products and/or services that fit a need in the marketplace; and they have processes that produce and deliver these to the end user.
And yet, most owners do not know how to go about exiting their business or how to grow through acquisition. Most say the process of buying or selling is too big or too unwieldy to take on. Here are a three great—and winning—first steps you can take early in the decision-making process:
HAVE A GAME PLAN: Write down your post-exit or post-acquisition goals. I read a study that looked at high performers as compared to the general population. The top 10 percent versus the rest of the field had goals for what they wanted to achieve.
The study then looked at the top 10 percent of the top 10 percent, and at what differentiated them from the other 99 percent. They not only had goals—they also wrote them down and reviewed and updated them regularly. Written and reviewed goals are truly meaningful steps to help you achieve the success you envision.
- In the case of exiting, write down what you want to be doing after you’ve left the company…travel, a hobby, more time with family? What lifestyle do you want? What will that lifestyle cost? What sale do you need to afford that lifestyle? Having a tangible vision of where you want to be in the next chapter will greatly help you decide what to focus on now.
- In the case of acquisition, write down what you want the new entity to be. How big do you want to be? What markets will you serve and how? What areas need to be shored up, improved, or even created? Define the long-term game plan—retirement, sales of the entity, pass it along to your children or management? As with selling, that tangible vision is a huge help in determining what type of acquisition will best help you achieve your goals.
GET ADVICE FROM M&A PEOPLE: Talk with people who know the business of buying or selling a company. People who have bought or sold a company or three will have good advice and a few pointers—but that advice will not be statistically significant. Professionals who spend their livelihood helping people like you buy or sell a company will have invaluable experience and input into what it takes to do so.
Some key areas to ask about include: (A) valuations and how they are calculated, (B) the steps and processes to make the deal happen, (C) how long will the process require, and (D) what will it cost you in fees. Dig in and get comfortable with what goes on in a buy or sell situation. The more you can glean from experts, the better you’ll feel when you’re ready to jump into your direction.
HAVE THE RIGHT TEAM: You’ve spent a lot of hard work and effort to find the right people to help you build your company to what it is today. To achieve a successful sale or purchase, assess your team against the goals you’ve written down in your game plan. Do you have the right people to execute your vision of the future?
- In the case of selling your company, you not only need to ensure there are capable people there after you’re gone—you also need those folks to keep the company going during the six to12 month process of selling. Potential buyers want to make sure a team is in place to keep the business going and growing. Yes, they may have their own team, but it won’t supply all the management required. Your team’s expertise is needed to ensure the business keeps moving forward. And, some purchasers put very few of their own people into operational positions. Also, if the deal doesn’t go through, you don’t want to come back to a stagnant—or worse, a declining business. Thus, you need a capable team during and after the sale.
- In the case of buying a company, you need to ensure you have a capable team, especially for the business you intend to build. New products and services, new processes, and new clients and industries all mean your current people either need to have the skills to handle the newness or the capability to learn. Yes, you will receive additional talent from the acquired company, but they won’t fully know your company. Thus, you need a solid team that can handle the now and the future.