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The Exit Strategy Handbook – Increasing the Value of Your Business – Part 1

Sep 17Jeff Matthews

We are exploring the recently released book, “The Exit Strategy Handbook” by Jerry Mills, the founder and managing partner of B2B CFO®.

The value of your business in a sale or transfer transaction is what a willing and able buyer will pay for it when you are ready to sell.  That sounds easy but in reality, coming to terms on a sale price, transfer structure, the timing of payments, holdbacks in escrow and earn-outs can be extremely complicated.  In addition, some transactions may contain a working capital adjustment if the buyer is anticipating a certain level of working capital on the sale date.

In “The Exit Strategy Handbook”, Mills quotes Larry Reinharz, Managing Director of Woodbridge International:

The number one reason our deals get delayed or don’t happen is declining financial performance.  While due diligence is important, and deals blow up in due diligence, it’s not the number one reason for delays and blow-ups.  In rough percentages, the reasons deals are delayed or don’t happen are as follows:

  1. Declining financial performance (80%)
  2. Unresolved issues that pop up in due diligence (10%)
  3. Owners getting cold feet and backing out (10%)[1]

Unfortunately it is not uncommon for sellers to shift into sales mode and lose their focus on the business.  In order for a seller to maintain the drive necessary to continue to build and grow their business, they will need support from their “Success Team” and employees.  New buyers will pay a higher price for a business that is growing and developing than one that is sliding and in need of repair.  When the seller gets a valuation in mind, they must continue to support the business so that it will command that valuation.

This is such a critical topic that I will explore in greater depth over the next few blogs.

 

B2B CFO® has over 200 experienced chief financial officers have deep knowledge of transactions and business improvement that can be tapped to help you sell your business.   You can explore the backgrounds of our team at www.B2BCFO.com/index.php?page=cfo-directory .

 


[1] Mills, Jerry L. (2013). The Exit Strategy Handbook. ISBN 978-0-09886932-1-0, Jerry L. Mills and B2B CFO, LLC., pp.61

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