Now is always the best time to start preparing for your exit strategy. Even if it won’t be till years down the road, that only means you have more time to refine it and make the most out of it.
Ultimately, most of what improves value to prospective buyers will also benefit you as the current owner of the business, by improving your operations and increasing profitability. The challenge is simply finding the time to assess where you’re at as a company, developing systems and routines to do this, and becoming proficient with said systems and routines. When they do become second nature,they’ll be easy to run and return great results.
To understand what makes a business valuable, we must understand what prospective buyers are looking for. In terms of the profitability and potential of your company, in depth analysis of your market is essential.
There are three categories that are important here, and they each feed into each other. First you, need to understand your addressable market and the competitive landscape. With a clear picture of how those interplay, you can identify your positioning within the addressable market and among your competitors.
This will allow you and prospective buyers to make more accurate projections of growth. Are your current trends sustainable? Why or why not? Could they be even better? How so? These assessments will help you find the spots where you can achieve greater growth. Once you know where to start, you can develop and implement strategies that will simultaneously grow your business to better serve you,and improve its market value.
This refers to the specific market you can actually deliver value to. Once you’ve identified who is a qualified prospect, and put a number on how many are within the reach of your business model, you’ll want to narrow it down even further.
The intent is to understand which of those leads are realistically available, and then deduce how cost effective it is to pursue those prospects. By way of example, those who are already being satisfied by competitors are going to be more expensive to win over. But if you have a better value proposition than said competitor, those leads might be better than ones one the edge of your serviceable area, where delivery costs are high and your marketing reach is decreased.
Expect buyers to focus on:
- Total market vs serviceable market
- Saturation of market, and how much room there is for new players
- Ease of entry into said marketing
- The share of the market you currently control
Now that you’ve identified the pieces of the market that are most relevant to your brand and business model, you’ll need to find out which other companies are invested in getting their fingers into that piece. You’ll also want to know how you match up against them, if you’re going to be fighting over business, and what your odds are of winning that business.
- Competitors currently in the market and coming to market soon
- Strengths/weaknesses of competitors (brand, pricing, offerings, etc)
- Your ability to compete in the market and win share
As you assess the strengths and weaknesses of other businesses, you’ll gain useful insights into how you competitors are winning leads/sales, and how you might refine your own approach. Knowing what you’re up against is key; if you can implement a strategy better than them, you have something to offer those prospects. If you can’t, you know what to focus on — that which you can do better. Accordingly,you’ll know who to market to, and you can then deduce the size of the market awaiting the value your company provides. From there, you can make useful growth projections — for your own purposes, as well as for the purposes of prospective buyers.
To complete the picture, we’ll draw conclusions based on how your addressable market is impacted by the competitive landscape.
- Value proposition and how it aligns with market
- Overall GTM and alignment with target customer buying habits (plus amount of success,regardless of theoretical alignment)
- Strength of your brand
- Pricing model and alignment with buyer’s willingness to pay
- Price vs method to buy (online, in person, sales rep)
- Impact of a more mature marketing & sales engine to accelerate sale, plus potential for cross sell, or penetrate target customers
Making growth projections will also help you to set goals in terms of growth. If the growth you have is not satisfactory, you now have good body of data to refer to when it comes to making adjustments. You can set goals, and develop strategies to address your challenges and limitations. As previously stated,this will increase not only the appeal that your company offers investors, but the value your company provides to you as the current owner. And as we’ve also stated before, and will state again, you’ve done yourself a huge favor by starting this process now. You have time to make the time you need to invest into changing the way your business operates.
Our business is to help you get the most out of your life’s work. Business models of all types and scale shave the potential to fetch a great value on the market, so Free Vector Advisors works out flexible terms to bring our resources to those businesses that don’t want to do front loaded payment arrangements. Contact us to discuss exchanging equity for legal and business advice from experienced consultants in the Seattle, Bozeman, Pittsburgh and Palm Springs areas.
Optimum Value Advisors