In this instance timing is everything.
Firstly, before you consider inviting funding, or marketing your business for sale, you must make sure you are ready!
Many businesses make the mistake of looking for funding or going to the market too early. This doesn’t mean that you don’t need funding now or that you don’t want to sell; but what it does mean is that you shouldn’t try to run before you can walk. If you haven’t properly developed and articulated your business case, attracting the right funding or looking for an exit, becomes a self-defeating exercise that will damage your company’s reputation and ultimately devalue the business.
Going too early will prevent you from attracting the right buyer or funding. In addition there will be an optimum time to do this – which is when the market is ready. If you develop and articulate your business case and the timing is right, then your business will be sure to realise its full expectations.
Regardless of whether you are looking to sell or attract funding for your business, there are a few things you need to consider and get right. Here is a checklist of “must do’s”:
Make sure you have a robust business plan. Your business plan must be practical, comprehensive, clear, marketable and commercially viable. It also needs to be tested.
In preparing your business plan, you must make sure your business is “Battle Ready” and fully prepared for the commercial and legal due diligence it will face from any buyer or investor.
Explore your options (Trade Sale, IPO, Private Equity) and entertain all offers. What is right for your business and its future growth plans. Don’t go for just one option and put all your eggs in one basket but consider all routes.
Make sure you have a good business model. Really articulate your proposition and the ongoing value it will bring to your business. Highlight your value propositions.
Get plenty of good customer testimonials and references – your customers should be your greatest ally.
Carry out serious market research to prove your offering and plans are realistic and achievable. Where possible, get your views, assumptions and growth projections independently collaborated and verified.
Make sure you have a strong, confident and buoyant management team. Investors and buyers always say that “having good people” is their No 1 consideration.
Take the time to implement a proper communications programme. Your business culture and employees will be relied upon heavily to drive the business forward, so make sure that all the stakeholders are on board, motivated, and understand the goals of the business.
Don’t forget the numbers! Test multiple financial models, scenarios and outcomes and conduct FAQ’s to ensure that your team can answer any tricky questions with confidence.
Focus on sustainable business. If possible introduce a strong customer loyalty program and encourage long term contracts. Above all make sure you can prove the recurring revenues on which your business is being assessed or valued.
Finally bear in mind that the best negotiating tool you will ever have is to deliver the numbers or plan whilst any negotiations are taking place.
So, to get the right result – be realistic about what your business can achieve, make sure you are “Battle Ready” and operationally fit for purpose, don’t over-sell and make sure you can deliver what is in the plan.
Alistair would be delighted to hear from you regarding how to help you attract the right funding for your business and prepare it for future sale. Please email Alistair at firstname.lastname@example.org or call 07810 564 680