When considering an exit sale of your company, how you capture maximum value is a complex process not defined by any one factor over another.
It is reasonable to suspect a company that is unprofitable has little value and thus a low price, and, in converse, a company that demonstrates consistently high profits is much sought after and attracts a high price, but this isn’t necessarily the case. Lifecycle, market saturation, regulation change and perception all combine to influence the external opinion on the ‘value’ of your business in the eyes of your purchasers.
If you want to achieve a successful exit you must address three key issues; price, value and worth.
You must also work to an exit strategy that is tailored specifically to explain the true value of your business – and this process is likely to take years.
Ask an accountant to value a company and it will be biased entirely towards numerical analysis of the company’s performance. This is not wrong, but most companies are incorrectly valued because the seller’s advisers do not properly apply factors such as market saturation, domestic and international market capacity, ‘customer value proposition (CVP)’ and competitors’ strengths and weaknesses.
Indeed, the fact that many companies do not have a CVP and are not fully aware of their direct competitors and the expansion capabilities of the market they are currently in and could be, contributes to the under-valuing of a company’s worth.
Genoa Strategy drives growth for our clients through the development of strategies for new product launch, domestic and/or international expansion, competitor analysis and the development of CVPs. Our reputation has led to the team being increasingly appointed to develop exit strategies that ensure the company is able to properly articulate its value to potential purchasers, be that through sale, merger or MBO.
Selling your company is no different a process to selling your products or services.
If you do it correctly there will be clear understanding and full acceptance of the value that’s been set, thus leading to less negotiation on the expected price.