Are You Selling Yourself Short? How to Maximize the Enterprise Value When Selling a Business — Jeffrey Feldberg

Looking back at it, it is still a little hard to believe we increased the value of our company by 10x in two years without substantially changing the underlying business. When people ask me how we achieved this the answer sounds a bit boring. Our strategy can be summed up in one word, preparation. To give you a couple of statistics consider that nearly 90% of liquidity events fail and for those that are successful 50% to 100% of the deal value is unrealized.

We often talk about the 9 steps of preparation but they can be summarized in two simple examples. First, you want to uncover any skeletons in the closet and clean them up, the second is to go hunting for those hidden Rembrandts and make sure they are on display. The secret to maximizing the value of your liquidity is found in these simple examples. However, don’t confuse simple with easy to accomplish.

The question we see most business owners get tripped up on is, “does your business run without you.” Whether you have a management team or you don’t have a management team we find most business owners are the center of the universe when it comes to keeping their business running. It is a classic and costly mistake that limits or even prevents your business from being sold.

Business automation is one of those skeleton or Rembrandt areas that can hurt or maximize your enterprise value. If you are doing automation well your team members aren’t wasting time on low-value activities but instead are focused on those high-value interactions. It allows you to get more done with less and leads to improved company culture. Whereas if you don’t have your business automation in place a potential buyer will see that as a risk and that lowers the price they are willing to pay.

The value of any business is not created at the deal table, it is created from the years of preparation you do beforehand. The deal table is more like looking in the review mirror of what you’ve done up to that point. The more prepared you are the higher your enterprise value will be. When it comes to selling your business you would be crazy to not work with an investment banker or business broker. Not only are they experts in these types of transactions but any fees you might pay are more than made up for in the increased size of the deal.

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Originally published at https://www.winningonmainstreet.com on April 29, 2021.