CEO Advisor Newsletter September 2019
Optimizing the Price and Timing When Selling Your Business
Sell at the Right Time for the Right Reasons
Common reasons for selling a business include:
A) A well-planned exit by the CEO that culminates in selling to a strategic buyer or Private Equity firm
B) Optimizing the price by timing a strong economy and coming off of a strong year
C) Selling a majority of the business to a Private Equity firm to realize the majority of the value now, while continuing to grow the business with the PE firm's expertise and financial backing to realize the ultimate sale (second bite of the apple) 3 to 7 years in the future
D) Distressed sales that happen for a variety of reasons, including lack of management, mismanagement, holding onto the business too long, disruptive changes in the industry, etc.
E) Unfortunately, the most common reason for selling a company is that a CEO or owner becomes ill or too old to continue managing the business adequately, which is the worst time to be selling. It is extremely difficult to deal with the additional stress of selling a business in this situation, and the buyer will use your circumstances as leverage against you.
Determine What Your Company Is Actually Worth
Your business is worth what a willing buyer will pay in the current marketplace. Determining a realistic price range is key. There are several business valuation methods ranging from valuing the assets and goodwill value of the business; Discounted Cash Flow (DCF) method; Market Value / Comparables method; and the very common Trailing Twelve Months (TTM) Multiple of EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) or Multiple of Revenue (for most software companies).
Other factors such as the quality of your management team, growth rate, gross profit margins, intellectual property and the current market and economic conditions also influence the price a buyer will be willing to pay. Your M&A Advisor or a professional valuation company can help you in determining the valuation range of your business for planning purposes.
Get Professional Help From a Team of Advisors
Selling a company is a far more complex transaction than selling a house or commercial building, which entails a multiple listing, showings, standard contract, 1 day inspection, financing, if needed, closing documents and a closing - and the land or building will not change over time.
Selling a business, which is a living, ever-changing group of intangible and tangible assets, employees, domain expertise, processes, products/services, on-going sales and marketing needs, vendors and customers all in a complex entity that can change dramatically overnight. Besides providing the necessary expertise to guide you through the selling process, bringing in professional advisors can help you maintain the emotional distance and objectivity you need to successfully sell your business, while enabling you to stay focused on running your business and continuing to achieve your Forecast.
Which professional advisors should you hire? An M&A Advisor, such as CEO Advisor, Inc., is critical to planning and driving the sale process forward. Your M&A advisor should be extremely experienced with the expertise needed to prepare you and your business for the sale, create a list of targeted buyers, communicate with and secure offers, perform the complete Due Diligence process and lock in the buyer to commence the legal documents phase, as well as, advise you on the business aspects of the legal contracts through to the closing. A corporate / transaction attorney is also critical and can draw up and/or review the many custom legal documents necessary to sell your business. A strong tax advisor or CPA is also important to optimize the dollar amount that lands in your bank account. Prepare for the Sale to Optimize Price
Preparation for the sale is critical and your M&A Advisor will draft all of the information needed to present your business properly to optimize the price and get a transaction done. This may take two months or so but may be the best 2 months that you spend in order to add value and attract the optimal buyer.
You also need to stay focused on your business and continue to achieve your Forecast. This will require time management like never before as you will be expected to participate in the sale process on some level, while continuing to drive your business forward.
You will also want to make sure your house is in order and this includes issues like assessing and possibly settling any pending lawsuits, as well as, ensuring your company is in good standing by making sure all tax payments are up to date.
Your M&A Advisor should also discuss with you the need for you to stay excited about the future prospects of your company after the sale, and to continue working with the company for 1 - 3 more years. Without this whole hearted commitment to the business after the sale, the great majority of buyers will simply pass.
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.
CEO Advisor, Inc. Advises Q-Vio, LLC on its Sale to Orbit International
Newport Beach, CA - CEO Advisor, Inc. (www.CEOAdvisor.com), a Newport Beach, CA business consulting and M&A Advisory firm, has advised Q-Vio, LLC, a leader in the enhancement of LCD display modules, on its sale to Orbit International Corp. ("Orbit") (OTC:ORBT), an electronics manufacturer and software solution provider. Q-Vio Corp. will operate as a wholly owned subsidiary of Orbit and become part of the Orbit Electronics Group ("OEG"). Q-Vio, LLC sells its products in the military, industrial, marine and broadcast marketplaces.
Ray Pronko, Q-Vio, LLC's President, will become Vice President of Marketing and Sales of Q-Vio Corp. and will operate out of Orbit's sales office in Bradenton, Florida. Additionally, Q-Vio Corp. will continue Q-Vio, LLC's practice of utilizing several manufacturing contractors in China for certain high-volume sales opportunities in order to preserve its 40% gross margin objectives.
Mark Hartsell, President of CEO Advisor, Inc., stated, "Q-Vio has a unique technology offering in the market and is a great fit for Orbit International. We are very excited that two such complimentary companies have joined together to create an even stronger product offering."
Ray Pronko, President of Q-Vio, LLC commented, "We are excited to become part of the Orbit organization and look forward to contributing to its future growth. We believe the demand for our sunlight readable technology will also provide Orbit the ability to increase its revenues beyond the military marketplace."
About CEO Advisor, Inc.CEO Advisor provides business consulting, growth capital and mergers and acquisition advisory services to effectively meet the specific needs of CEOs, presidents and business owners of small to mid-size companies in a wide range of industries, including software, technology, media, service firms, healthcare, manufacturing and many more.
CEO Advisor's mission is to advise CEOs, presidents, business owners and principal executives with the needed expertise and focus, coupled with hands-on advice to grow your business to the next level and realize your life's dream through a successful exit.
Contact Mark Hartsell, MBA, President of CEO Advisor, Inc. for a no cost initial consultation at (949) 629-2520, by email at MHartsell@CEOAdvisor.com or visit us at www.CEOAdvisor.com for more information.