If the headline above appeals to you, congratulations, you are probably an owner or management team member. I know how difficult it is to accomplish all that you’ve had to accomplish to be in the position you are in today. Furthermore, since you are reading Adweek, you probably work in an industry such as media, information services, technology or consumer goods—all massively competitive, where only the best can survive. And for some, in 2020, survival has been a challenge.
The uncertainty that this year has created may have triggered a thought such as: “I have a lot invested in this business and now may be a good time to sell part of it, take some chips off the table and provide additional protection, opportunity and growth to myself and my team.”
I empathize with this insight, as I sold part of my first marketing services business in 2008, which was a challenging year as well.
In the past four months, our private equity firm completed the sale of a media company and a digital consultancy for more than $150 million. There are buyers out there and they have capital, but things have changed. So, keep these seven essentials in mind to increase the probability of success.
1. Find your equivalent
I’ve always loved this quote from Napoleon Hill, “Every adversity brings with it the seed of equivalent advantage.” I was reminded of this quote during several recent conversations with business partner and decade-long friend, Tony Robbins.
One of his businesses also happens to be key to his mission: to help people. He prefers to do this through live events, but of course he has not been able to for most of the year. His solution was remarkable. He created a studio to conduct the largest Zoom call in the world and in doing so reimagined his business.
We’re not Tony and we don’t have his resources, but if he can do this with a live events business, it provides for a tremendous role model of what is possible. There is a seed of equivalent advantage in your business. You and your team can find it. And when you do, articulate it clearly and quickly to whomever you are approaching to buy into your business.
2. Define your sustainable competitive advantage now
You and your team must be able to articulate, illustrate, and demonstrate your sustainable competitive advantage quickly. And you must prove that in 2020 it is still as relevant as it was in years past. If you want to go to market with your business now, address what has changed upfront and how you managed to get through it while ‘future-proofing’ yourself in the process. Investment bankers and prospective bidders will have this concern in the back of their minds; answer it for them proactively.
3. Find a believer
One of the best tests to see if your business is ready to be sold is to present your story and financials to an investment banker. If they get excited and want to represent you, you have cleared a significant hurdle. Why? Because they have seen a dozen businesses like yours in the past month and they have their finger on the pulse of the market to determine how likely it is that you would have a successful transaction. You can choose to market your business on your own, but their insight about challenges you will face and potential valuation matters.
4. Set numbers you can hit
Nothing kills a process or reduces value more than missing your monthly revenue, gross margin and EBITDA budget. Once you share these numbers with a prospective bidder, you must hit them. The moment you miss one, you lose leverage. It is imperative you and your team set numbers you can hit.
5. Reset your expectations
I have had a dozen meetings with business owners and their management teams so far this month. A few are posting record growth numbers. Those who aren’t are asking to be valued off of numbers from last year. Since bidders usually value your business off of the trailing twelve months or the TTM, I advised them to reset their expectations or wait.
6. Think of your meeting as a live production
The last business we sold transacted for more than $100 million. There was not one in-person meeting. But we produced around 20 live televised events through Zoom.
Early on in the process, not being able to meet in person or to tour offices because of the Covid-19 pandemic seemed like a significant barrier. But there was another way to look at this situation. In a normal year, you might fly four or five team members to the management meetings for a week or more. Now, you can showcase 15, 20, 25 of your most talented team members because everyone is participating through video. As a buyer of the business, understanding the depth of talent provides greater certainty. And as a seller, you get to create a run-of-show like the finale of (insert your favorite reality show here).
7. First impressions are essential, but last impressions are lasting
We’ve all heard the tales of why first impressions matter and have from time to time tried to “master the first five seconds.”
What’s not so obvious is the last impression. No matter the type of investor, it is likely that they will want to build your business with you and sell it again or perhaps merge it with another entity. When that time comes around again, which could be three or four years after you sell them a percentage of your business, remember that the last couple of weeks of the deal can get tense. At that point you will not be remembered for your first impression, but rather, your last. Be consistent throughout the process—with all of its hurdles—and make that last impression count.