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CEO Advisor® Newsletter
May 2019
14 Ways to Prepare for Selling Your Business

For many entrepreneurs, the thought of building a successful company and eventually selling it for tens or hundreds of millions of dollars represents the entrepreneurial dream. You can increase the likelihood of achieving this goal by taking specific steps to prepare your company for a successful sale.

1. Increase Your Growth Rate
A Key metric of value, especially for technology companies, is to break out of 10% growth per year and increase your growth rate to 30% - 50% per year. This may take a very different approach than you have used in the past and you may need expertise and help to get there. Prior to and during an M&A process, it makes strategic sense to grow your sales efforts, which may mean hiring additional sales reps and increasing your overall investment in growth initiatives.

2. Growth of your Sales and Profits
Focus on substantially ramping up Revenue and Profit. Along the lines of Growth Rate is increasing your Sales (Revenue) and Net Profits to bolster value. EBITDA (earnings before interest, taxes, depreciation and amortization) is primarily used as the key metric in mergers and acquisitions (M&A) for valuation purposes. The higher your EBITDA, the higher your valuation will be at your exit.

3. Focus on Your Financials
An audit or accounting review of your financials is likely to be required as part of an M&A process. You should consider having your financials audited by a reputable auditing firm as part of your preparation prior to an exit. An accounting review or full audit will give your buyer confidence in your financials and will educate you on what a GAAP audit/review looks like. The importance of proper financial reporting cannot be overstated. For M&A purposes, focus on what the acquirer is looking for to get a transaction completed.

4. Recurring Revenue Model
A recurring revenue or subscription model will allow you to get a higher EBITDA multiple and thus a higher valuation. Software-as-a-Service (SaaS) can be challenging to generate substantial Net Profits, but can be extremely effective in building value toward a lucrative exit.


5. Address the Skeletons in Your Closet
Head off any blemishes or issues prior to the Due Diligence process. If there are any potential or real fires, put them out prior to commencing an M&A process. Address issues head on and be transparent with anything that a buyer may consider as "hair on the deal." There is absolutely no reason to apologize for anything that happened in the past. Put your emotions aside, be objective, explain your issues and move forward.

6. Create a 3-year Financial Projection
It will be necessary to create a 3-year financial projection. Make certain the financial numbers you project are aggressive, but achievable. Hitting your financial projections will be absolutely critical once you begin the M&A process, including during the Due Diligence process. Achieving your financial projections is great while in the M&A process; missing financial projections can halt the process or seriously jeopardize your valuation and require you to renegotiate your sale price or terms.

7. Create a Powerful Presentation
Any prospective buyer is going to look closely at the growth potential of your business and need to first understand the business model, unit economics, sales strategy, management team, products and services and historical financials and projections for the next three years.

8. Create a SWOT Analysis
Define your Strengths, Weaknesses, Opportunities and Threats. Your prospective acquirer will attempt to poke holes in your business, since they will want to get the best price possible. Be prepared to focus on your strengths and opportunities and defend your threats and weaknesses.

9. Increase Your Visibility
Prior to and during your M&A process, you should maximize whatever opportunities are available to increase the visibility of your business. Maximizing visibility might mean attending and speaking at trade shows, writing guest columns on blogs and issuing press releases about strategic hires, new products and company achievements. More importantly, keep the sale of your company 100% confidential and do not discuss it with your employees, clients, vendors and especially your competition.

10. Identify Potential Acquirers
Create a list of all of your potential acquirers. Be sure to include the obvious (similar businesses) and the not so obvious (businesses that would benefit from your services). Treat this as a targeted sales list, as this is extremely important. But first make sure you are a 100% prepared to start the M&A process as you have one chance to make a good impression.

11. Hire an M&A Advisor 
An M&A advisor will provide a wealth of expertise and do a lot of the heavy lifting to prepare for and pitch your company to interested buyers. For starters, an M&A advisor will help you prepare a management presentation for your business. They will also help you better understand and present your financials, and prepare all of the information needed to start the M&A process. 

Once you are ready to go to market, the advisor will prepare and finalize your targeted acquisition list, make calls to all prospective buyers and set up meetings, secure a Letter of Intent (offer), organize and manage the Due Diligence process and coordinate with your corporate/transaction attorney for the legal documents through to closing. Your primary role is to stay focused on your company's performance during this complex process.

12. Hire a Controller/CFO or Leverage Your M&A Advisor
Being able to set financial goals and effectively articulate your past, current, and future financial performance is critical to a successful M&A process, while maintaining strong financial performance in your company. Have an experienced controller or CFO on staff to assist with financial analysis and management, or utilize your M&A advisor to prepare and present this information on your behalf.

13. Cut the Fat
Prudently look at your expenses and eliminate unnecessary costs and expenses to improve Gross Margins and EBITDA. Every dollar added to EBITDA will be worth many times that amount in value. This may require tough decisions so work with your M&A advisor to make the best decisions to maximize your value.

14. Consider Alternatives to M&A
Selling your company is only one of many ways to achieve a liquidity event. One alternative to M&A includes Private Equity (partial sale by pulling some chips off the table, but continuing to build for a larger buyout). An M&A advisor such as CEO Advisor, Inc. can explain the benefits of weighing your options to best suit your needs.

CEO Advisor, Inc. has 15 years of experience as an M&A Advisor. Mark Hartsell, MBA, President has thirty-eight years of experience, including thirty-five years of experience in mergers and acquisitions.

Contact Mark Hartsell, MBA, President of CEO Advisor, Inc. at (949) 629-2520 to discuss your growth capital options, valuation and exit strategy in a no cost, no obligation meeting at your office, email MHartsell@CEOAdvisor.com or visit www.CEOAdvisor.com for more information.
Critical Sales Management Methods to Improve Performance
Sales growth is a critical factor in driving Net Profits and value in your business. Sales management plays a crucial role in the success (or failure) of your company. Effective sales management sets the tone, culture, goals and expectations and drives your business forward. With so much invested in your sales team, it may not be easy to take an objective assessment of your team.

You will benefit tremendously through improvements in your hiring process, goal setting, sales compensation plans, sales strategy and sales management methods to create a more productive work environment and sales team.

Below are critical methods that will benefit you by re-assessing your own sales team and how you manage them with objectivity and fresh eyes. CEO Advisor, Inc. has successfully implemented sales strategies and affected the needed changes in our clients for over fifteen years.

Weekly Sales Meetings
Consistent weekly sales meetings are absolutely critical to a motivated, focused sales team. Focus on goals, your sales pipeline and sales training each week to maximize sales productivity. Utilize a sales CRM such as Salesforce.com and require daily use for all sales team members to plan, track and report on all sales activity.

Sales Management Training
Managers often emphasize to their employees the necessity for constant development and training. The same applies to you as the CEO, president or business owner and to your top sales executive. Consider hiring a professional business advisor to optimize sales management within your company to help you manage your sales team towards a
more productive and profitable year.

Sales Goals
Sales goals should be annual, quarterly, monthly, weekly and daily. Goals should include calls, appointments, conference calls, opportunities, proposals, closed deals and other sales goals. Without the proper sales goals and tracking of these goals, your growth, sales, profits and the value of your business will suffer substantially.

Assessment and Growth
How do you set your sales team up to succeed? Assess and evaluate skills, and then set goals that are challenging but realistic. The more successes a salesperson achieves, the more likely they will strive for larger challenges and sales opportunities moving forward. Setting unrealistic goals may not allow for an environment in which the salesperson can grow and achieve results.

Sales Leadership
Be a resource for your team. Share your own success stories, best practices, and advice on your areas of expertise, and provide direction to help your sales team in closing deals. Show your team that they can come to you with challenges and questions and expect to receive support and leadership. Role play in sales meetings to provide added benefits, closing techniques and confidence to win more deals.

Address Issues Head-On
Don't allow negative morale to penetrate your culture. When signs of negative morale or other issues become apparent, find out what is at the root of your employees' concerns, and then have an informative and open conversation with them about their concerns to come to an expedited resolution.

Trust
The primary role of any manager, especially a sales manager, is to provide leadership and guidance. The only way this will be effective is if you first build and maintain trust with your team. Then you can lead them to many great successes and achieve your sales goals.

Accountability
Create accountability in your sales team by ensuring that you follow up on instructions, assignments, goals, requests and advice that you have passed down to them. Also, hold them accountable to their sales goals. In following up with them, you will also get a better understanding of the obstacles they are facing and be better able to advise them on how to overcome these issues. Lack of accountability by any sales team member should not be acceptable and addressed immediately.

Communicate Effectively
It's important for everyone on the team, not just management, to be aware of and understand the overall goals of the company. Be sure to communicate frequently to ensure everyone is on the same page and communicate your goals regularly. Ineffective or infrequent communications will cost you many customers and dollars!

Give Praise - Sales is a tough job!
Be sure to demonstrate your appreciation for your employees on a regular basis, even if it is in the form of a word of thanks for putting in extra hours, achieving your monthly goals or submitting reports timely.

Let CEO Advisor help you with your sales management issues and take your business to the next level. To further evaluate your management decisions, grow your business to the next level and increase your sales, margins, profits and value of your company, contact Mark Hartsell, MBA, President of CEO Advisor, Inc. at (949) 629-2520, by email at MHartsell@CEOAdvisor.com  or visit us at www.CEOAdvisor.com for more information.

Testimonial  


"Thank you Mark! And thank you for all your help over the years. It is truly appreciated and it was a great ride of accomplishment for all of us. Stay in touch!


Echoing Craig's statement of much thanks and appreciation for the many years in the trenches together with us and helping us achieve a successful exit."

CEO and President, Digital Agency Client
(After Their Successful Sale)

CEO/President, Engineering Services/Manufacturing Company


Whether it is growing a business to the next level, turning a distressed company around or preparing a company for an exit, Mark's firm, CEO Advisor, Inc, provides a broad range of services and Mark is there for the CEO every step of the way."

 


Partner

Haynes & Boone, LLP

Words of Wisdom


"Yesterday does not equal tomorrow. Forget the past and move towards your goals."

Tony Robbins
Motivational Speaker