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Can you sell your company for top dollar?


Peter Butler

Peter Butler

Can you sell your company for top dollar? I can’t. My company, Valtrend, is highly dependent upon my personal efforts – right now anyway. Over time, I hope to change that. I know it will take time and effort. I hope that you are further along than I am.

Let’s see if you are. Whenever I speak to business owners, I tell them they must make themselves obsolete – or worthless – to the business. Yes, you heard that correctly. Quite frankly, I am not sure any business owner has completely met this goal, but many have come close. So, how do you make yourself “worthless”? It is a process, consisting of the following:

• Transfer customer and supplier relationships to key employees.
• Cultivate and train a strong management team that can step up in your absence.
• Consider non-competition agreements.
• Set up systems and processes – but not (hopefully) bureaucratic processes that stifle innovation.
• Swallow your ego.

If you are worthless, the buyer has a lot less to worry about after he/she purchases your company.

A good test of your progress in the steps above is to take a vacation – a real vacation. Don’t call the office and don’t accept any work-related calls. Can you do it? For how long could you do it?

Business owners who have truly made themselves worthless can theoretically do it into perpetuity. Now, perpetuity is kind of a long time. When you think you are ready, just try it for a week and see how it goes. When you get back to the office, hopefully you won’t have a week’s worth of work waiting for you.

If it was a seamless absence, you are on your way to potentially creating a “top-dollar” company – whatever top dollar is for your industry and your company at that given moment.

While the list is too long to mention in this piece, some other important items to consider in your quest to build maximum value are:

• Create recurring (profitable) revenue, not “one and done” revenue.
• Diversify your customer base.
• Get audited or, at least, reviewed financial statements.
• Clean up your books.
• Eliminate discretionary expenses
• Don’t be penny-wise and pound-foolish. Buyers do not like a ton of “add-backs.”
• Create a competitive advantage.
• Differentiate your company.

If you are able to successfully perform the above actions, once again you have mitigated some of a buyer’s concerns. Value is all about the future; no one has a crystal ball, however. But, if you are able to execute the above actions, your company’s crystal ball will become a little less cloudy. Buyers pay for clearer pictures.

Of course, sometimes value and price diverge. If you want to sell for top dollar, sell to a strategic buyer. A strategic buyer may be a competitor, or a company somewhere in your supply chain, or someone who sells a complementary product or service.

These types of companies may be able to enhance your revenue, decrease your costs or maybe they just want to buy you very badly and are willing to pay over and beyond what the economics of the deal might indicate. Remember, if you are not selling your company, you are buying it. You want to buy something of value, so you can sell something of greater value later.

Peter Butler is a principal at Valtrend, LLC (www.valtrend.com), a business appraisal / mergers and acquisition advisory / litigation support company. He can be reached at (208) 371-7267 or pete@valtrend.com.

About Pete Butler