CEO Advisor® Newsletter
Maximizing the Value of Your Business for a Big Exit
CEO Advisor, Inc. advises CEOs, Presidents and business owners on building sales, profits and value of its client's businesses. This involves many aspects of any business throughout the life of your company. The fact is you never know when a potential buyer is going to knock on your door to acquire your company so it is critical that you prudently manage your business to optimize both A) Sales and Profits and B) Value of your business.
There are many aspects of your business that contribute to maximizing the value of your company and building a sellable, growing business. How you manage your business, your strategy and business model, your growth rate, your pricing, your gross margins, your recurring revenue stream and other critical factors not only play into the growth and profitability of your business, but your ability to sell your business and sell it for a maximum value when someone comes knocking or you proactively put the business up for sale.
A successful business is built over time by a CEO or business owner who is able to assemble a cohesive, focused management team that produces quality products and services. Then, the business must create a sales and marketing machine coupled with operational processes that generate profits of a magnitude to both compensate the shareholders and owners adequately for their risk and ultimately make for a lucrative exit. This requires astute planning and skilled execution.
Why do most CEOs and business owners fail to create a sellable business or a business that has a value worthy of the risk of ownership? Or better yet a business that yields a large exit?
Here are 10 key issues to maximize the value of your business and make for a grand exit.
- Planning and Goal-Setting to Raise the Bar. Planning and goals are vital to focus your efforts, measure progress and track achievements. Forecasting, accountability and strong management are the path to success. Creating a plan for this growth in the form of long and short term goals, a Business Plan, or even annual goals and tasks will help your business reach new levels of success. Seek expert advice to formulate, quantify and implement your goals to maximize your company's value.
- Management. Management is the number 1 factor in achieving success and building a business of real value. The CEO or business owner must share in the responsibilities and have a well-chosen, seasoned team, even if very small, to enable the company to grow and prosper. In companies of 5 - 50 employees, the management team typically comes in the form of a business advisor, and other professional service firms that round out and provide specialized expertise to facilitate this growth and success so reach out to a professional for the help you need.
- Recurring Revenue. The true test of a solid business model is a) a "need to have" product or service and b) a recurring revenue model. CEO Advisor advises on formulating repeat, forecastable revenue to increase sales, profits and value of your business. This is not only critical in software and other technology companies, but in all types of companies.
- Growth Rate. Your growth rate is a major factor in the value of your business. Many CEOs and Presidents of the companies that I meet feel that a 10% growth rate is typical and acceptable and will suffice when they get to the point of selling their business. The truth is that this lack of strong growth not only costs them tremendously each year, it cripples their business value and in fact inhibits them from being able to sell their company at all 99% of the time. A strong growth rate of 25% - 50% is needed each year as a small to mid-size business to maximize your value.
- Sound Sales Strategy. Without a solid, well thought out strategy and plan to focus resources effectively toward goals, there is little to no opportunity to grow sales, increase profits and maximize the value of your business. This is critical and is rarely done consistently in small business today despite its importance.
- Gross Profit Margins. Gross Profit Margin is the profit from providing your products and services before expenses and overhead. This is the most important aspect of achieving high profitability, strong profits and a high value of your business. Predominantly, businesses are based on a multiple of EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization). If your Gross Profit Margin is low, then your profits after expenses are highly likely to be low, as well. These depressed earnings will crush the value of your business or exclude you from selling your business at any price.
- Large Market. Sellable businesses have large markets to sell into and grow. If you simply can't grow your business past a couple of million dollars in sales, it is highly unlikely that anyone would pay good money for it and expect to grow it further. Your strategy and planning should position your company to sell into a large market, while being focused on the highest and best target markets within your total addressable market.
- Unique or Proprietary Products and Services. "Me too" companies tend to be far less valuable, as well as, have a much harder time achieving sales goals. Having unique or proprietary products and services sets you apart in the marketplace with sought after, in-demand services. Because this and other factors are so critical to your successful exit, engage a business advisor to assist in sorting out your strategy and formulating your new products and services, as well as, reviewing your current products, pricing, sales channel and gross profit margin to ensure adequate profitability.
- Addressable, Identifiable Target Market. A critical mistake by many small to mid-size business owners is trying to sell to anyone with a pulse and a dollar in their pocket. This creates tremendous inefficiencies and is the largest waste of time and money in most small to mid-size companies. A strong sales strategy includes an identifiable target market that is researched and imported into your CRM software with 90% of your sales focus and efforts selling to these prospects in your target markets. In order to maximize your value for a large exit, you must specialize and provide expertise in one or a few markets and bring exceptional value to your buyer.
- Strong Sales, Sales Management and Marketing. In the end, it is a sales and marketing play that makes for a growing, profitable, valuable business. Sales and marketing execution is not only the most critical aspect of most businesses, it is the hardest to execute on. Faltering or failing in sales, sales management and marketing will cost any business from millions of dollars to hundreds of millions of dollars over the life of the business through to the sales price of the business.
Timing is another critical factor although it is tough to time the market for most privately-held companies. The fact is, valuations are very high now with a tremendous opportunity for nearly all business owners, but this cannot continue for long. Business cycles are recurring every 5 to 10 years and we are now 7 years into the current business cycle. Selling on the way up is critical. Selling on the way down is nearly impossible and may delay your plans for an exit for another 5 to 7 years or more.
CEO Advisor, Inc. provides hands-on advice to grow your business to the next level and help you in realizing the biggest payday of your lifetime. With over 30 years of experience in mergers and acquisition, we can provide a full service to realize your ultimate goal.
Contact Mark Hartsell, MBA, CEO of CEO Advisor, Inc. to discuss your options for your exit with a free initial consultation at your office by calling (949) 629-2520, by emailing MHartsell@CEOAdvisor.com or visiting us at www.CEOAdvisor.com for more information.
Referrals as a Catalyst to Higher Sales
Why are some business owners and sales professionals consistently more successful, while others putting in the same hours and selling the same products struggle financially to make ends meet?
As a business owner, President or CEO, you know that a primary response to this question is painfully simple; the successful business owner or sales professional spends more time on the telephone and never forgets to ask for referrals!
Five Powerful Prospecting Tips to Build Your Business
Tip One: Don't Forget to Ask for Referrals
Referrals are the life blood of many businesses. When it comes to asking for referrals, timing is everything. Research indicates that the most effective time to ask for referrals is right after you've made the sale or provided a valuable service for your existing customer.
Once the sale has been completed, your customer will be on an "emotional high" and far more receptive to the idea of providing you referrals. Even if you do not make the sale, a professional, consultative sales professional or business owner earns the right to ask for a referral from a prospect or customer so be bold and take this opportunity to ask.
Tip Two: Guide and Reward Your Advocates
An advocate is a person who's willing to go out of his or her way to recommend you to a friend or associate. Always take the time to thank your advocates, and give them feedback on the status of their referrals.
Tip Three: Strike While the Iron is HOT
Prospects, like food in your refrigerator, are perishable and therefore need to be contacted quickly. Each day you let slip by without making the initial contact with your referral dramatically reduces the probability of you making the sale. Immediately input the referred prospect in your CRM (customer relations management) software, contact them and schedule a follow-up call if you do not reach them initially.
Tip Four: Track Your Referrals
It's critical to have CRM software like Salesforce.com to record your referrals, your remarks and track your contacts, appointments, opportunities and sales. Make sure to have Referrals as a Lead Source in your CRM and include a field in the CRM for a specific referral source. Accountability, follow-up and tracking your sales activity and referrals are a critical aspect of consistently increasing sales, profits and the value of your business.
Tip Five: Schedule a Minimum of Two Hours a Day for Phone Calling Each Morning
Make your prospecting calls in the morning while you, your prospects and referrals are both fresh and alert. Be consistent in making your calls by blocking this time on your calendar daily. Treat your prospecting time with the same focus you would give to any other highly important aspect of your business.
CEO Advisor, Inc. provides business, sales and marketing advisory services to grow your business to the next level. For more information, call Mark Hartsell, MBA, CEO at (949) 629-2520, email MHartsell@CEOAdvisor.com or visit us at www.CEOAdvisor.com.
"I owned a small but growing company and realized I was in need of an experienced business consultant to help organize our existing structure which would enable us to seek outside funding. Our CEO Advisor® was encouraging and demanding, which is just what we needed. He brought a level of professionalism to our company that eventually allowed us to sell to private equity."
CEO, Consumer Products Company
Words of Wisdom
"Nothing in this world can take the place of persistence. Talent will not; nothing is more common than unsuccessful people with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent. The slogan "press on" has solved and always will solve the problems of the human race."
Prime Minister of the U.K.