You started your company 20 years ago “in your garage”, worked many 80 hour weeks, bootstrapped your growth, view your company with the pride of an entrepreneur, and are now considering your exit. The purpose of this article is to help you evaluate your company as a strategic acquirer might. From that perspective we will ask you to focus on ten critical areas of value creation. The benefit to you is that the better your performance in these areas, the greater the selling price of your business. The most likely result is that you will sell at the high t https://npfinancials.com.au/range of the multiples normally associated with your industry. For example, during the last 18 months similar companies have sold at an EBITDA multiple of between 4.8 and 5.7 times. Moving your company from the low end to the high end of that range can result in a significant swing in transaction value. If your EBITDA were $2 million, the low price is $9.6 million and the high price is $11.4 million. The Holy Grail in selling your company is when an acquirer throws out the traditional multiples and acquires your company based on strategic post acquisition performance. Below is our list of STRATEGIC VALUE DRIVERS:

1.CUSTOMER DIVERSITY – If too much of your current business is concentrated in too few customers that is perceived as a negative in the acquisition market. The concern is that if the owner exits and the major customers leave, the business could be negatively impacted. On the plus side, if none of your customers accounts for more than 5% of total sales, that is viewed as a real plus. If you find yourself with a customer concentration issue and are planning an exit, start focusing on a program to diversify. A quick fix would be to make an acquisition of a competitor with customer diversity, integrate them and then take your company to market.

2.MANAGEMENT DEPTH – A common thread in privately held businesses is a concentration of responsibility with the owner operator. The buck stops here may be a good slogan for a presidential candidate, but it will not help create value for a business owner. An acquirer will look at the quality of the management staff and employees as a major determinant in acquisition price. A key in preparing for exit is to develop your people so they could run the business after you are gone. You should make the move of assigning your successor a year in advance of your scheduled departure date. If you have no one that you feel has the ability then go hire someone that can do the job. If you have a strong management team in place and you are anticipating an exit, you should try to implement employment contracts, non-