The foundation of exiting a business is understanding the key valuation indicators (KVIs) and how these can be tweaked to the best advantage of both the exiting shareholders, and the incoming owners.
If the seller doesn’t prepare the business for the sale, he will receive less money for the business, and instead, his buyer will make the necessary changes anyway, and pocket the difference later . Seems a bit of a waste, don’t you think? Money for jam being given away.
From this page, you may remember this diagram:
A refresher: It represents the valuation process:
- Hard evidence based figures are aggregated
- The figures and other aspects of the business are interrogated
- The KVIs are evaluated
- A valuation is arrived at.
From that base a business owner can implement tactics and strategies to his own best advantage, repeating the process periodically to establish the growth in value, or to take his own involvement to its ultimate conclusion – an exit.
The path to an eventual exit looks like this:
Flowing from possible strategies, a series of sprints are planned for different sectors and different investor types.
The “pitchdecks” are tested against the real players in the particular industry, and evaluated retrospectively, again and again, all the time improving for the level and depth of information either necessary or required to get the message across without compromising the actual business or its owners.
Unlike the sale of a conventional product or service to a particular target market, the sale of equity in a business can very often mean different things to different sectors, and therefore several, very different, target markets probably exist. It is not unlikely that they would be very divergent in their own goals. Hence the need for a variety of pitches.
This is more tricky that one would think at first. Business owners don’t always understand that what is said, either by omission or commission, in the presentation can mean so much to different people.
What is not said sometimes leaves a hole so big it cannot be patched in the understanding, and therefore the purchase decision of the buyer or investor is a non starter. Alternatively that which is said, can be too much, and therefore compromises the future of the business, possibly for some other investor.
With a proper pitchdeck in place, the next series of events, possibly running concurrently with pitchdeck evolution, can start taking shape:
Why would that run concurrently with other processes?
- The engagement with potential investors is a learning experience for the seller, as much as it is for the buyer.
- Potential investors will themselves, give off ideas – sometime quite liberally – which can often be used to improve the offering.
- New markets and opportunities often present themselves during the process.
- The subject business itself may transorm during the process.
An expensive process?
That looks like an expensive process, doesn’t it? Well, it’s not really. We understand the importance of not adding onerous cash drains to your business in the time leading up to some sort of exit plan.
The process is certainly time consuming, and quite extra to what a business owner is expected to deal with in the usual course of events. Professional intervention makes for an easier, tried and tested methodology, with much less reason for distraction for the busy management teams.
We have some innovative finance options to make the process affordable, and if you’re interested, we should talk. Drop me some information by email, and we will come up with an affordable solution for you which makes profitable sense to us. firstname.lastname@example.org.