Getting the Market to “I Gotta Have it!”

You don’t get the price you want for your business, which is usually the highest price, by asking for it. Rather, you get it by creating conditions that produce that price.

Those conditions, familiar to economics enthusiasts, are simply strong demand for the limited supply that is your business. Strong demand combined with limited supply produces a higher price.

Favorable demand, i.e., sufficient demand to produce the price you desire, is a function of:

·      Attractive Product. Ensuring the product, i.e., your business, is attractive. And “attractiveness,” given it lies in the eyes of the beholder, should be viewed from the perspective of potential buyers. If you were a buyer of a business, what qualities would you want it to have? Each situation is unique, but you’d likely want:

o   Strong proven growth

o   Solid growth prospects

o   Good profit margins

o   Proprietary value (something that makes it not a commodity)

o   A solid employee and management base and structure

o   Solid processes and procedures

o   A high employee retention rate

o   Good reporting and accountability mechanisms

o   A solid record as good member of the community

o   A low risk profile

o   Professional representation in all dimensions (e.g., offering materials, legal and accounting representation)

·      Strong Offering Materials. Offering materials that portray your business in the best possible, albeit truthful, light.

·      A Brief, Compelling Pitch. A verbal presentation by you that describes the business at the “30,000-foot level” in a way that engenders a prospective buyer’s greed (i.e., “I want to own this!”).

·      Deep Knowledge. Knowledge of and ability to articulate all details below the 30,000-foot level.

·      Skilled Process Management. Generating sufficient demand from prospective buyers.

·      Generating Multiple Offers. Generating several offers from prospective buyers.

·      “Selling” the Demand. Subtly communicating the demand situation to prospective buyers.

·      Building and Maintaining Flow. Maintaining a momentum or “flow” in the process, which is greatly assisted by a process schedule that clearly specifies:

o   The timeframe for initial meetings with prospective buyers

o   The deadline for submission of LOIs

o   The schedule for consideration of LOIs

o   The target date for selection of a buyer

o   The target date for signing the LOI

o   The target date for signing of a PSA

o   The target date for the buyer completing due diligence

o   The target date for closing the sale to the buyer

·      Avoiding the Walkaways. Understanding that prospective buyers often, despite their outward appearance, seek a reason to walk from a deal all the way up to closing, it is important to manage the process to reduce the chance of these reasons arising.

GROW and SELL Advisors, wholly-owned by Traversi & Co., LLC, is a premier sell-side M&A advisory firm – a boutique investment bank – serving the lower middle market.  Visit us here.

For a short video clip on this topic, click here.