How to Position Your Company for Sale (or make it stronger and keep it all to yourself)

Written by Carol Coughlin. Posted in Financial Strategy

Perhaps the most critical question owners of growth-focused companies will ever ask themselves, their executive team and/or their board of directors is this:

What is the end game?

It’s an essential question because the answer is what guides the company’s growth strategy.

After all, if you don’t know where you want your company to be at the end, how can you possibly develop the plan that will get you there?

While there are multiple end game options, each with its own set of preparatory strategies, tactics and tasks, we’re going to focus on two end game objectives in particular: sale outright and selling a portion of your company for an equity stake to an investor.

If you intend to either sell all or a portion of your company, you need to begin positioning the business for those outcomes immediately.

In these cases, the overarching goal is to ensure your company is attractive to potential buyers whether they’re individuals or other companies, as well as to investors.

Interestingly, there are several factors related to the current business environment and economy that are becoming ever-increasingly important to buyers and investors. But let’s start with a quick of overview of the most basic requirements companies preparing for sale should meet.

  1. Achievement of market validation (along with deep understanding and ability to communicate the company’s secret sauce).
  2. Qualified and well-showcased leadership team capable of achieving growth (in prep for investors in particular, but also relevant for a sale goal in many cases).
  3. Ability to show sustained or increasing growth that’s supported by an actionable strategic plan.
  4. Credibility in projections – hitting or coming in at or better than the budget.
  5. Clean balance sheet, simple capital structure and audited financials for the past three years.
  6. Legal/regulatory compliance.
  7. No excess expenses/costs.
  8. Strong governance.

Now, let’s look at a few of the new requirements companies seeking to sell or obtain investments are being asked to meet in response to a changing marketplace.

The New Requirements for Sale

Create a Strong Corporate Culture

The existence of a stable, strong, effective and people-oriented organizational culture is becoming increasingly important to buyers and investors of or in companies reliant on human resources because:

  • The strength of the corporate culture has such a big influence on a company’s ability to grow.
  • Attracting and retaining top talent is becoming more of a challenge for companies everywhere.
  • Technology is driving significant change and disrupting industries and corporate culture is what dictates whether or not an organization will be able to adapt to advances and, even better, if the company will be capable of being its industry’s innovator.

Grow a Great Reputation (and monitor it frequently)

Corporate scandals, poor offering or service reviews and low employee morale are detrimental to a company’s ability to sell or obtain investor funding – and this information has never been easier to find thanks to search engines.

So, companies with sale as their end game goal need to regularly assess their practices for compliance and good corporate citizenship, as well as what people are saying about them online.

It can take years, even decades, to repair reputation, so monitoring it both internally and externally can help you spot issues before any become a crisis.

Side bar: According to an October 2017 New York Times article, Lyft and Uber are locked in a race for which can go public first and Lyft has benefited from Uber’s series of high-profile stumbles and, as result, seen its own profile rise in the eyes of investors.

Be on Top of Tech

In today’s companies, technology plays a bigger role in increasing efficiency and generating recurring revenue than ever before. It can also be a key differentiator, setting a company apart from and ahead of competitors. And, if a technology is proprietary, it may even become part of a company’s offering mix, setting the stage for a new future revenue stream.

This means that staying abreast of what’s happening in technology, as well as putting resources toward developing technology or simply investing to be current, is a must for companies seeking to sell (not to mention, companies that want to become the marketplace leader or simply compete).

Clearly, there are many factors that impact how attractive a company is for sale, and if either is in your plans it pays to prepare well in advance. Yet, as I mentioned previously, preparing in the ways listed above can only help a company grow stronger, more sustainable and more valuable.

So even if your end game does not include a sale of all or part of your company, you can’t help but benefit from planning your growth strategy as though it does.

Of course, once you have built an organization as strong as one people or companies are clamoring to buy or invest in, you never know what opportunities will arise.

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Carol Coughlin

Carol Coughlin founded BottomLine Growth Strategies, Inc., in 2006 as a way for small and medium-sized businesses to access the same high-level financial and operational expertise that gives large companies a distinct advantage. Using her own extensive corporate experience and willingness to sit in the hot seat as a catalyst, Carol helps BottomLine Growth clients climb to the summit of their success.
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