Every small business owner and entrepreneur dreams – at some point in time – that he or she will sell his or her business for such a large sum of money that living the life of their dreams becomes a reality. Of course, there are some lucky ones that state they are “living the life of their dreams” now. Those individuals have usually had some kind of liquidity event with their primary company or may have sold other companies in the past. Whether your dream life is happening now or you fantasize about it, the liquidity event (or several of them if you are a serial entrepreneur) has or will fuel it. The way to generate the maximum liquidity (thus making you a tasty morsel for all those private wealth advisors and financial advisors), is to sell your business or portion thereof for the highest possible price. Simple, eh? Why didn’t you think of that you say? Well read on for suggestions to do just that.
Get out in front of potential buyers.
One of the most important ways to get the most money for your business: Get out in front of potential buyers. This is another great reason to do publicity and marketing. Not only will you reap benefits from gaining exposure to prospective customers, you will also attract the interest of prospective buyers. Be aware that PR adds far more credibility than marketing, especially for the buying set, so spend more efforts there if your budget is somewhat limited. Remember, just as with any good or service sold, the value is ultimately determined by those willing to buy. The more buyers you have (or it seems you have), the higher the price you can command for your business.
Form partnerships, joint ventures or strategic alliances with potential buyers.
Another way: Form partnerships, strategic alliances, joint ventures, or other strategic relationships with larger companies that have a significant presence in your industry. Many of these larger companies (see my other blog’s post: Corporations and Their Venture Arms as Angels) have venture funds that acquire businesses that provide technology or services that enhance or complement their current businesses. Others just have strong mergers and acquisition (M&A) activity involving smaller companies that introduce them into new markets or provide them with customers and relationships. (i.e., larger corporations that acquire small businesses with significant government contracts) Buy building strong working relationships with larger companies that do at least occasional acquisitions, you better position your company to be wholly or partially purchased by one of your partners.
I recommend several partnerships to increase your exposure including one (or two) deeper strategic partnerships. This is akin to dating a few people before marrying. Like my mother used to say to me, “you can see what you must have, what you must not have, and all the other stuff that’s negotiable”. Outside of going public, a large strategic buyer will typically pay the highest price. “Strategic” connotes additional significant benefits beyond those a financial buyer would factor in.
Talk to an M&A consultant and a succession planner.
My final two suggestions: talk to an M&A consultant and a succession planner. There are a number of options for creating a liquidity event for your business at a high price including but not limited to going public via PIPEs (not as popular as several years ago) or doing a leveraged recapitalization. An M&A consultant can help you determine what option(s) may be the best fit for you and your company. A succession planner can help you ask the hard questions that will get you to the point where you are emotionally and financially ready to sell AND help connect you to the individuals and entities that will help you strengthen your company and make it a more salable asset. Finally, a succession planner can help you determine if the highest price is truly what you want…or if having a family member or friend or the employees buy the business from you at a reasonable price is.
(Note: The Inc. article, “How to Get Acquired for a Big Price”, triggered my thoughts on this subject. Click on the link to read the article.)