Why do most business owners leave the majority of their deal value in the buyers’ pockets?
Whether it’s a full exit or you’re raising capital, you have one chance to get it right, and you better make it count.
So, why is it that business owners leave most of their deal value on the deal table?
The answer is three words.
Before revealing the answer, don’t assume that simplicity is simple.
The answer is a lack of preparation.
When it comes to your liquidity event, preparation is the beginning, middle, and end of
Who am I, and how do I know?
I was that kid who started his eLearning company right out of school with no money, experience, or team. I had no business being in business, and the results showed.
My grit and passion kept me in the game long enough to achieve success. With success came an experienced buyer who was a wolf in sheep’s clothing.
I said “no” to the 7-figure offer based on 3-times EBITDA and “yes” to mastering the art and science of a liquidity event.
Two years later, I said “yes” to a different buyer with a 9-figure offer based on 13-times EBITDA.
I increased my company value 10X even though I had the same company, people, and service.
Had I accepted the first offer, I would have left my true deal value in the buyer’s pocket.
What did I do to secure my financial freedom and realize my full deal value?
Preparation is the stepping stone to massive success – Jeffrey Feldberg
Receiving your full deal value depends on both the depth and quality of your preparation.
Read and prosper from “Actually Use Advice On How To Avoid M&A Deal Killers.”
Most business owners believe their deal value comes from the liquidity event.
It’s these same business owners who leave the majority of their deal value in the buyer’s pocket.
The proper preparation for your liquidity event must achieve two things:
Buyers are counting on you to make mistakes. After all, every mistake you make robs you of your deal value.
Your liquidity event process starts only when your preparation ends.
A case in point is the skeletons in your closet, which are your business blind spots. Fixing your business blind spots before your liquidity event has you show up with a clean slate.
Common blind spots include your business not running without you and tax issues.
Your deal value is also dependent on identifying the hidden Rembrandts. Your business is world-class in specific areas.
Don’t make the fatal mistake of assuming your competitors are doing the same things. Broadcast to your buyer and the world the areas your business is world-class.
You’ll increase your deal value and make your liquidity event “sticky” for buyers.
Do you know the one strategy to increase your deal value and have buyers on their best behavior?
With competition everyone has to try harder – Harold H. Greene
Do you know why buyers tell business owners to stay away from an auction when it comes time for a liquidity event?
Buyers know that an auction both increases your deal value and robs them of their power.
What’s the catch?
A successful auction requires a high level of preparation.
Let’s leave the world of mergers and acquisitions and enter the world of selling a home.
Suppose you decide to sell your house today. If you’d like to receive the highest price for your home, you won’t put it on the market today.
Instead, you’ll do everything to prepare your home to look its best. You’ll paint your home, declutter the rooms, and hire the best agent to get the highest price.
With the preparation of your home done, you’re now ready to put it on the market and welcome a bidding war.
It’s no different for your business. The proper preparation for your liquidity event positions you for an auction. Buyers have a level of comfort upon seeing a business that’s prepared.
Competition amongst buyers increases the deal value and keeps them on their best behavior. Have many buyers involved in the process gives you choices, and the buyers know it.
Do the preparation and enjoy increased deal value and leverage over buyers.
Now that you have buyers at the table, do you know what you must do to drive your deal value even higher?
A leader is a dealer in hope – Napoleon Bonaparte
Is your deal value nothing more than a complicated formula in a spreadsheet?
Most business owners believe their advisors and investment bankers.
Unfortunately, most business owners are wrong.
Read and prosper from “5 Reasons To Sell Hope On Your Exit That Will Blow Your Mind.”
Is it possible that the intangible feeling of hope can increase your deal value?
In a word, yes.
Your future buyer what your business has done yesterday and today. The historical performance of your business brought your buyer to the table.
What keeps your buyer at the table is the hope you instill in your future performance.
Know this and know this well.
People buy on emotion first and justify their actions with logic later.
Your future buyer is no different.
Where most business owners get it wrong is not admitting their failures.
Yes, you read that right. Being vulnerable and admitting your failures helps to increase your deal value.
You didn’t have the money or experience to take your business international. The great news is that your future buyer has both the money and experience.
You lacked the people and time to create that new service you’ve been dreaming about for years. Your future buyer has both the people and time to launch the service.
Create a proforma that shows what your business can do with the buyer’s resources.
Show what a better tomorrow looks like with your expertise and your buyer’s resources. Watch the magic happen, and your deal value increases.
When it comes to deal value, timing is everything. Do you know how to leverage timing to your advantage?
Timeliness is next to godliness – Unknown
When it comes to your deal value, don’t believe for a moment that you can time the market.
If someone tells you that you can time the market, run, run as fast as you can in the opposite direction.
What you can do to maximize deal value is to ensure that you prepare for your future liquidity event.
Most business owners make a fatal mistake that has them leave most of their deal value on the table.
Do you know what the fatal mistake most business owners make?
Believing that deal value happens during the liquidity process.
The deal value from your liquidity event is a direct reflection on your preparation.
Prepare first. An increased deal value follows second.
Should you prepare today even though you’re liquidity event is five years away?
End of story.
When you prepare today, you save:
Preparing today has you and your team do a deep dive into your business. You deepen your knowledge and don’t save on high-priced advisors doing the work for you.
When you’re prepared, keep your profitable business forever or sell it tomorrow. You choose.
Either choice is a great one.
When you’re prepared, you can take advantage of a “hot” market or opportunities in real-time.
There’s a direct correlation between preparation and deal value.
The time and costs you put into preparation are a rounding error compared to an increase in deal value.
Do you know the one thing you don’t want to do at the deal table?
If you do not know where you are going, every road will get you nowhere – Henry A. Kissinger
Your deal value happens long before your liquidity event.
When you’re prepared, you create options for you and your business. One of those options is walking away from the deal table altogether.
The power of saying “no” to a buyer, especially when you have many buyers, is powerful.
Now you know why buyers hope and pray that you’re both not prepared and that you don’t run an auction.
Successful business owners know what they want ahead of time. When you know what you want you welcome an enormous deal value. The process of preparing has made it clear what’s possible.
When you sign a letter of intent with a buyer, you’re giving up your leverage for a period of time.
What you never give up is your ability to walk away and to keep running the business.
Preparing ahead of time means that you’ve leveraged tax strategies that minimize taxes. You’ve found and removed the skeletons in your closets. The areas that you’re world-class in, the Rembrandts in the attic, are now on display for the world to see.
When you’re prepared, you’re sitting at the deal table on your terms with your deal value.
Yes, there are areas that you’ll need to concede in, but you won’t concede in your deal value.
The right preparation makes it painful and difficult for a buyer to say “no.”
Welcome to the art and science of a liquidity event.
When you prepare today, you prosper tomorrow.
It’s a sad day when a business owner leaves most of the deal value in the buyer’s pocket.
As business owners, we’re great at solving painful problems. We take risks, create jobs in the community, and raving fans for our businesses.
But that the skills that built your business are not the same ones for your liquidity event.
Your future buyer or is smart, experienced, and sophisticated. And yes, your future buyer is counting on you making costly mistakes. Most business owners do.
Had I gone the traditional route of most business owners, I would have left most of my deal value on the table.
In saying “no” to my 7-figure offer, I took the time to prepare to say “yes” to a 9-figure offer. In the process, I increased my business value 10X.
Today I dedicate myself to helping business owners prepare for their liquidity event. I’ve created a proprietary solution that is resilient, relentless, and gets results.
When it comes to your deal value and liquidity event, you have one chance to get it right, and you better make it count.
Most business owners don’t prepare and instead wait for competitors to make an offer. This so-called strategy is no strategy at all. This approach is terrific for your buyer and lousy for you and your financial freedom.
Doing what’s right isn’t easy, but the results are worth the time and effort.
Your future wealth and happiness depend on you putting in the time and doing the preparation.
Do this and you’ll increase your deal value and pave the road for a prosperous tomorrow.
You can do it. I know you can.
Here’s to you and your success.
Your Biggest Raving Fan,