A tremendously valuable company that garners the
attention of buyers in the marketplace, and is apt to receive multiple offers of
purchase, doesn’t just happen due to good luck or fortune. Behind every
company of value stands years of preparation. Preparation is the key to
winning. Bobby Knight, one of the greatest basketball coaches of all time
said, “The will to succeed is important, but what’s more important is the will
to prepare.” Brian Tracy, a great motivational speaker and leading expert on
success in business, has stated that there is no such word as overpreparation.
In discussing effective speaking, Tracy says that 90% of an effective speech is
determined by how well the speaker has prepared.
Likewise, preparation is the key to a valuable company
and a successful exit. There are five key areas that business owners must
continuously focus on as they prepare their company for an exit at the highest
- Ensure that key financial statements are
prepared timely and accurately. Good, clean financial statements open the door
to prospective buyers by giving them a clear insight at a company’s financial
status. This creates a level of confidence into the company’s true condition and sets it apart from the
- Build a customer base that is loyal, increasing, and
diversified. A prospective buyer wants to know that customers are fiercely
loyal to the company because of the company’s excellent service and value. By
diversified, I mean that the business is not dependent on any one customer for
survival, but that the customer base is adequate to withstand the loss of one or
- Manage the company within the parameter at all
times that Cash Is King. Strong positive cash flow is at the very top of a
prospective buyer’sinvestigation. The
more cash generated the higher the value and the greater likelihood of multiple
offers. Be sure that cash flow is measured, projected, and controlled with a
solid financial infrastructure.
- Run the company with the understanding that
people are the most valuable asset. Continually evaluate people and ensure
that key people are competent and treat the company as their own. Make sure
all reward and incentive systems reward competence and loyalty.
- Finally, but most importantly, lead at all times
with integrity. Potential buyers can quickly determine if they are dealing with
a credible leader. Their confidence soars in a company when they know they are
dealing with a person of integrity, because they can trust what they are
purchasing to be what it claims to be.
Preparation in the above five areas will result in a
company of high value.