September 28, 2020
“Skate to where the puck is going!”
This advice from Wayne Gretzky is exactly what we want business owners to do when they start thinking about planning the eventual exit of the company they have built.
My team and I spend much of our time visiting with business owners about their plans for stepping down, and one of the most common things we pick up on is that these owners overwhelmingly think their business will be valued based on their track record and bygone glory. As in hockey, winning in the final period of your business career requires you to have a well-conceived game plan; a dedicated cadre of 1st-string professionals working as a team; a clear, actionable, and executable strategy; and most of all, a personal attitude that understands you must play with intensity all the way through the final tick of the clock until the buzzer sounds - leaving it all out on the ice!
To put it plainly, buyers are seeking a well-oiled, cash-generating machine. A machine whose people, processes, and procedures govern every aspect of the business from revenue capture all the way through cash collection. Your business does not have to be perfect or flawless – no business is, – but a buyer senses risk when the business they hope to purchase struggles to demonstrate a predictable sales pipeline and reliable backlog. They cringe when agreements are not strategically used to retain top talent and critical vendors. They shy away from businesses that appear to be too cyclical, have collections issues, or are overly dependent on a continuous infusion of Capex to fuel growth.
So what do you do when you know your business isn’t perfect but you’ve made the decision that the best way to achieve your personal goals is to sell it to the highest bidding – yet currently unknown – successor, who will honor your legacy and embrace your culture?
A couple of days ago, my business partner, Bret, absolutely crushed it on a critical call with an exceptionally sophisticated buyer group who had made an offer to purchase one of our client businesses. After the call, I complimented him on the way he led the buyer’s team through the many clarifying and positioning questions we had regarding their initial offer. His response was both classic Bret and perfect for this blog – he said, “Perfect Preparation Prevents Pitifully Poor Performance.” I said, “Aaahh, the 6Ps!” My friends, that also is the secret to how to exit a privately held business on top. Just like a Stanley Cup winning team, a business owner must prepare to win by choosing a great exit advisor to lead the way, allowing and assisting that advisor to build a great team, endorsing and supporting a sound exit strategy, and to the very best of their ability, doing their part to deliver championship-worthy results. I truly cannot figure out why so many business owners fail to understand that their sale outcome is in direct proportion to their team’s pre-sale preparation coupled with real-time business execution and a backlog/runway added during the period of active marketing. To get top dollar, it takes an incredible amount of preparation to lead great-fitting buyer prospects towards your desired outcome and to flourish in the due diligence phase. My advice: Do not scrimp or cut corners! Align yourself with an advisor who prepares both you and your business with intensity and zealous precision.
Everybody enjoys hearing about your company’s glory days, but a new owner dreams of their own championships and must be convinced that the best is yet to come. Take a moment to put yourself in their shoes and you will see how they are more interested in what the business will do for them versus what it did for you in the past. You and your team must competently show them where the puck will be once they take over and begin to implement their strategy.
Thus, this analogy of “Skating to where the puck will be” is akin to preparing your sale event to coincide perfectly with a buyer’s need for your business to generate a return on investment while conjuring an optimistic vision of future growth and prosperity for the next generation of owners.
An all-around win – where both the buyer and seller achieve their goals in the transaction – is possible when getting the seller on top simultaneously coincides with business momentum that carries the buyer forward as they enter and take over.
Remember, a great advisor can take your company’s weaknesses (every business has them) and position them as sources of low-hanging fruit for a buyer who is strong in your weak areas. They will envision how to come in and make rapid strides in their own value-creation strategy, thus giving them confidence that they can improve the business and grow it from where you handed it off.
As in sports and life in general, success is found where preparation meets opportunity!
So for the biggest and potentially last great transaction of your life, nothing can be more valuable than having an advisor who’s been where you want to go come alongside you and prepare you for the rigors required to end this season of your life like a champion.
About GaP Business Advisors
Gilbert & Pardue Business Advisors (GaP) is a Houston-based business advisory firm serving lower middle market and middle market business owners from coast to coast through representation for Mergers & Acquisitions (M&A) and through business value-growth services such as Fractional CFO, Advisory Board, Executive Coaching, and Consulting.
Matt Gilbert and Bret Pardue established GaP to provide owners of businesses generally enjoying annual revenue of $5-$75 million with the quality of M&A representation and value-enhancement services previously only available to upper middle and large businesses. GaP brings highly-experienced executives, sophisticated financial and marketing products, proven-effective processes, and fully-integrated expertise to every engagement. No other M&A firm serving the lower middle and middle market provides the quality of representation and transactional expertise that we do.