Due diligence preparation in advance helps you achieve two critical things.
First, you increase your deal certainty. Second, you increase your enterprise value.
When it comes to liquidity events, the statistics say it all. Up to 90% of liquidity events fail. One of the main reasons is the lack of preparation by sellers.
Most sellers leave 100%, or more, of the deal value on the deal table of the successful liquidity events. This is a polite way of saying sellers give their hard-earned money to their future buyers. Insult to injury, most sellers don’t even know it.
What can you do to avoid becoming a statistic?
Due diligence preparation.
Who am I, and how do I know?
I said “no” to a 7-figure offer and “yes” to mastering the art of the sale. Two years later, I said “yes” to a 9-figure offer.
What made the difference?
I created a 9-step road map of preparation that gave me the certainty to capture maximum value. Today, I pay it forward and help business owners prepare through a 90-day system.
The 90-day system, called the Deep Wealth Experience, teaches you the 9-step road map. You create a blueprint to help you optimize value. You also have the certainty of capturing maximum value on your liquidity event.
The 9-step roadmap helps you think like your future buyer. You learn how to find and remove the skeletons in the closet. You also learn how to find the hidden Rembrandts in the attic and put them out for public display.
When you master the 9-step roadmap, you’re now in a position to increase your enterprise value.
There are five critical areas for due diligence preparation. Mastering these five areas increases your enterprise value.
Do you know what these five areas are?
The future belongs to those who prepare for it — Jim Moran
Most sellers perform due diligence preparation during the liquidity event. Don’t make this mistake, as it can cost you the deal or lower your enterprise value.
Instead, hire an M&A lawyer before starting your liquidity event.
Hiring an M&A lawyer in advance gives you time to confirm that you’ve hired right. The time spent with your M&A lawyer confirms you have the best cultural fit.
During your liquidity event, you in a situation where you’re making important decisions. You must have absolute trust in your M&A lawyer. You don’t know what you don’t know, but your M&A lawyer does.
Having both the bench time and trust with your M&A lawyer allows you to make decisions with confidence. After all, you have one chance to get it right with your liquidity event. You want to make sure you get it right.
At the same time, your M&A lawyer can help you find and hire your other advisors. As the saying goes, when the team works your dream works.
Your advisory team can and will make or break your liquidity event. Having the best advisors isn’t enough. As necessary is ensuring that your advisors have the right chemistry with each other.
Due diligence preparation lists are a dime a dozen. Knowing what to do with the lists and how to do it is what counts. Your M&A lawyer knows to look for what to do.
Luck is what happens when preparation meets opportunity — Seneca the Younger
At the heart of capturing the maximum value for your enterprise value is preparation. Preparing before your liquidity event starts helps to ensure you do two things.
First, you find and remove the skeletons in your closet. Second, you take the hidden Rembrandts in the attic and put them out for public display.
Your future buyer is counting on you making mistakes.
Every skeleton in the closet that your future buyer finds gives your buyer a reason to penalize you. Skeletons lower your enterprise value and give leverage for the buyer to ask for an earnout.
Removing skeletons protects your enterprise value. You also remove leverage from the buyer for an earnout.
At the same time, due diligence preparation in advance of your liquidity events helps you in a vital area. You find the hidden Rembrandts and put them out for public display.
Most business owners believe they are doing the same things as the competition.
Your business is world-class in at least one area and usually two or three. These areas are Rembrandts.
Rembrandts out for public display turn prospects into customers. You also remind your customers why your business is different.
As necessary, Rembrandts on display let your buyer know that you know. Your buyer will identify your Rembrandts but won’t tell you to keep a lower enterprise value.
When your buyer knows that you know your Rembrandts, you have leverage.
Do you know the one report you must do before your liquidity event?
Luck is a crossroad where preparation and opportunity meet — Jesse Jackson
Due diligence preparation before your liquidity event saves your time, healthy, and money. While you’re at it, due diligence preparation increases your enterprise value.
A Quality of Earnings (QoE) report has become a standard part of a liquidity event. Buyers look to a QoE report as a tool to substantiate their view of the business and its value.
Successful sellers perform their own QoE report before starting their liquidity event.
Here’s a little-known strategy but powerful strategy for your due diligence preparation.
Ask the firm that is preparing your QoE report to first complete a “mock” QoE report.
A mock QoE report highlights both your strengths and weaknesses. You now have the opportunity to address the troubled areas. Once your cleanup is complete, you can now have the final QoE report.
Due diligence preparation before your liquidity events gives you time. You have time to find your weaknesses and remove them.
Spending the time and money on your own QoE report gives you the following benefits:
The time and effort spent on a QoE report is a rounding error compared to the increase in enterprise value.
Do you know the new area in due diligence preparation that is becoming the new standard?
Preparation done today creates a higher enterprise value tomorrow — Jeffrey Feldberg
Due diligence preparation before your liquidity event includes a data privacy audit.
As the reliance on technology increases, data theft continues to increase.
A data breach can shut you down or create massive liabilities, fines, and lawsuits.
Due diligence preparation before a liquidity event does two things. First, identifies skeletons that you can remove. Second, increase enterprise value and deal certainty.
Look to a data privacy audit before the start of your liquidity event as insurance. Your data privacy audit highlights areas that need attention. Resolving data privacy issues for your business is good for business.
At the same time, when you have a data privacy audit, there’s no need for your buyer to perform the audit. As a result, you reduce the time required for due diligence by the buyer.
Showing your data privacy audit “seal of approval” instills confidence in your buyer. The level of trust between you and your buyer increases, as does enterprise value.
The alternative is no alternative. The last thing you want is your future buyer performing a full-fledged data audit.
Your buyer will find skeletons in the closet, which can cost you either the deal or lower your value. Neither scenario is desirable.
Leverage the full power of due diligence preparation. Perform a data privacy audit before your liquidity event.
Both your business and customers win from enhanced security. Deal certainty increases, as does your enterprise value. It doesn’t get any better.
Do you know the three massive benefits you receive from due diligence preparation?
Planning is bringing the future into the present — Mike Vance
Due diligence preparation before your liquidity event saves your health, time, and money.
What’s the alternative if you don’t prepare before your liquidity event?
Congratulations, you now have a second full-time known as your liquidity event. The pressure of meeting tight deadlines is immense.
Late nights and early mornings become the norm. The stress and pressure take a toll on your health and time.
You sacrifice your hard-earned money when you bring in high-priced consultants. The consultants complete the work that you and your team don’t have time to do.
And by the way, you still have your business to run. Some of the projections you give your buyer occur during the liquidity event. Failure to meet the numbers can kill the deal or lower your enterprise value.
On the flip side, due diligence before your liquidity event saves your health and time. You and your team follow a schedule that compliments your lifestyle.
You save money because you and your team are preparing. In the process, you learn more about your business and industry.
The strategies for preparation are the same for growing your business. While you’re saving your health, time, and money, you’re increasing enterprise value.
When you’re prepared, you reduce the due diligence period required by the buyer.
Remember, speed always favors the seller.
As a result, deal certainty increases. Your enterprise value increases from the two actions you took. First, you removed the skeletons. Second, you found the Rembrandts.
The bottom line is the bottom line. Always take the time for due diligence preparation before your liquidity event.
Due diligence preparation before your liquidity event increases your deal certainty and enterprise value.
When it comes to your liquidity event, you have only one chance to make it count. The five proven strategies of due diligence preparation get results.
Remember, speed always favors the seller. Due diligence preparation pays it forward by giving you speed during the liquidity event.
At the same time, due diligence preparation has you find and remove the skeletons in your closet. While you’re at it, you find the hidden Rembrandts in the attic and put them out for public display.
You increase deal certainty and enterprise value.
Due diligence preparation is one of nine steps of preparation. When you master the nine-step Deep Wealth roadmap, you achieve two essential things.
First, you create a blueprint to optimize the value of your business. Second, you now have the certainty of capturing the maximum value in your liquidity event.
The best time to prepare was years ago. The next best time is today. Whether your liquidity event is in one year or ten years away, the time to prepare is today.
Business owners make the fatal mistake of not preparing before a liquidity event. One of the main reasons that up to 90% of liquidity events fail is lack of preparation.
Put in the time and preparation today so that you can secure a bright and prosperous future tomorrow.
Here’s to you and your success!
Your Raving Fan,