Content curated for late stage start-ups ($1M-$5M EBITDA) + emerging midsized companies ($5M-15M EBITDA)
Ask yourself these three questions below
For example, you wish to sell your company. What is the core driver for doing so? It could be lifestyle, burnout, new venture or otherwise. But you must know the process is rarely an easy one. Lack of conviction will not only make the process worse, you will scare away investors and buyers and may not come back from those burned bridges.
You may have a successful company that is ready for the next stage and worthy of an exit or capital infusion. But to investors and buyers, your company is only as good as you can prove on paper. It is not the obvious due diligence items that kill a deal such as financials, forecast and investor deck. Numbers are important but they are what they are, for the most part. It's operational inefficiencies like lack of formal client contracts, poor CMR systems, outdated records and processes that most buyers and investors consider nonnegotiable deal breakers.
In some cases, "The Process" can be as brief as 3-6 months. In most cases (historically speaking), most sale processes run between 9-15 months. During this time you will have to continue to be at the helm of the company while simultaneously wearing another hat during this roadshow. This can be quite daunting even with the proper internal and external team(s) running point for you. Ultimately, the drain on time, money and other resources will pay off in spades if you thoroughly plan, practice, and prepare for all eventualities.
"That's a lot of money to spend up front for financial reporting and other prep work"
It WILL cost you more later. Your potential buyer(s) will require it during the due diligence process. Waiting until then will put you under time constraints and additional rush fees from CPA firms. Preparing as early as possible not only saves you time, money, and worry but it strengthens your valuation while giving the buyer less reason to contest it. Same thought applies to other upgrades to the business such as your ERP and CRM systems to name a few.
Whether you are exiting, acquiring, or raising capital for your business, working against external factors such as timing and state of the economy will unnecessarily drain you if not prepared in advance. War time is not the time to test your skills, set a strategy, and take inventory of your armory. You should plan and prepare your company to be in a position of strength for whenever the opportunity emerges. This allows you to capitalize on it, on your terms.
Most prepare for the worst, but how about preparing for the best for your company?
Did you ever get an amazing credit card offer personally at the lowest rate when you already have plenty of those? Yet when you truly need the extra capital boost, you struggle to find even a high rate one. That methodology will help create a safety moat around your business! A few examples of how to deploy this thinking. Create and build a strong relationship with more than one bank when times are good (mission critical when seeking credit advances and increases or the bank's appetite or markets shift against your favor). Forge relationships with your competitors (these could be your eventual buyers and acquirees). Fortify your client (increases client retention, drives new referral revenue) and vendor (helps to manage costs and pricing risk) relationships as some key examples. You never know what opportunity can be lurking nearby, in good times and bad.
COMING SOON: Tactics on how to prepare now for your exit later
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