When you’re selling your business, it’s easy to become obsessively focused on the final price. Hiring a competent advisor may lower that price by taking a percentage of the sale, but a quality M&A advisor is worth their weight in gold. A 2016 survey asked CEOs who had recently sold a business through an M&A advisor whether the buyer added value. One hundred percent of respondents said yes. Sixty-nine percent reported a “significant” impact.
What’s more, 84% of respondents sold their business for either the initial estimate or higher—no small feat, given that owners often overestimate the value of their businesses. These outcomes point to the incredible value of hiring an advisor. So don’t let your skepticism deter you. Here are three key ways that the right advisor adds value to the transaction.
Identifying ways to increase cash flow
You’ve run your business according to a specific formula for years, possibly even decades. It can be hard to see room for improvement from the inside. An advisor offers a fresh take and lots of knowledge. They can quickly identify and implement options for new wins and more cash flow. In many cases, the key is to find and nurture streams of recurring and passive revenue.
The right buyer identifies these options, then helps you fairly assess the risks and reward inherent to each. From there, it’s just a few quick steps to more cash flow.
Uncovering weak management
Your management team is the backbone of your operation. You probably hired and trained each manager yourself. So you may be blind to their shortcomings because these are people you like and trust. A strong team can run your company in your absence. Yet in most cases, an owner has institutional knowledge that their team lacks. The right advisor can get to the bottom of this problem, and help you implement policies and training for quickly fixing it. Your advisor can also help you decide whether you need to move some people out of management or move some of your staff into leadership roles.
Get your financials in shape
At due diligence, it’s all about the financials. The buyer wants to see clear evidence of a well-run business, improving profits, and stable income streams. It’s not enough to just offer up impressive numbers. You must be able to back them up. Moreover, your forecasts must be based in fact—not fantastical wishful thinking. The right advisor helps you get your financials in good shape. They’ll offer expert analysis and insight, then work with you to ensure you’re fully prepared for the demands of due diligence.
In most cases, the buyer will be most interested in trailing 12 months EBITDA, so the business must be in exceptional shape in the year leading up to the sale. This is the year that an advisor has the greatest power to impact. So listen to them, lean on their insights, and then enjoy the bounty of a successful sale.
When you’re selling a business in middle-market manufacturing, service, or distribution, rely on the team with a combined century of experience in mergers and acquisitions: ASG Partners. We help you increase business valuation, prepare for sale, and close the deal.