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CEO Advisor® Newsletter
November 2018
10 Questions to Ask Prior to Selling Your Company

If you are considering selling your company, or see a shift in the market leading to an economic downturn, here are some critically important questions to ask a mergers and acquisitions expert.

CEO Advisor, Inc. provides business consulting, funding and mergers and acquisitions advisory services to CEOs and business owners of small to mid-size companies. A major benefit to our clients is that Mark Hartsell, MBA, President works with each client first hand on a weekly basis. Other M&A advisory firms will solicit your business and then assign a junior associate to handle the great majority of the process - an extremely risky roll of the dice.

Mark has 38 years of business experience with decades of mergers and acquisitions experience. He is certified in Mergers & Acquisitions from the Wharton Business School, University of Pennsylvania, achieved a Master's Degree in Business from Loyola University and has a hands-on approach to guiding entrepreneurs through every aspect of the sale.

Here is your opportunity to discuss with Mark these and other valuable questions regarding your most valuable asset - your business. Contact Mark Hartsell at (949) 629-2520 or email MHartsell@CEOAdvisor.com.

10 Critical Questions to Ask

1. Exit Strategy - Do I have an exit strategy? Do I need an exit strategy? What is an exit strategy? Well, this is actually 3 questions but all point to one important issue - You never know when a potential buyer with a fat check is going to knock on your door, so Yes, every company needs an exit strategy. Simply stated, an exit strategy is a plan and process suited to you and your business to optimize the value of your business and to facilitate a sale at the proper time.

2. Readiness - Is my business ready to be sold? The answer is typically a resounding, No. Preparing your business for sale can take up to a few months; optimizing the value of your business can take years. At a minimum, you want to always be prepared to sell (when that proverbial buyer comes knocking on your door) and this is where an M&A advisor such as CEO Advisor, Inc. is extremely valuable as we optimize your value and attractiveness to a buyer during this preparation process.

3. Timing - Is this the right time for me to sell my business? There are many considerations here, but I like to look at it slightly differently. I ask CEOs and business owners, when is it too late to sell your business? Meaning, what things could happen that would make it very difficult and burdensome for you to sell your business? Things such as, A) if a deep recession hit and now you had to wait 7 more years to sell to retrieve a good value or to find a legitimate buyer; or B) if my illness were to return, how much risk would occur to my business surviving or how much burden would it be on my family and employees; or C) if stiff competition surfaced or a disruptive and far less expensive technology, product or service directly encroached on my business how would I recover or reinvent my business and how long or how much money would that take?

4. Market Timing - Is the market right to sell my business? Today, valuations are extremely high. The economic cycle is now 10 years old with the average economic cycle ending at 7.9 years over the past 75 years. With high valuations and a low interest rate environment, it has never been a better time to realize the best value for your business in our opinion. And this window of opportunity will not last indefinitely, in fact it is shrinking by the month with a lot of volitility in the stock market.

5. Time Commitment - How much of my time will be involved in selling my business and how long will it take to sell my business? Selling your business is a commitment and will take a substantial amount of time over six to nine months or longer. With the right team of experienced advisors, your time involved will be weekly, but far more manageable, predictable and minimized with a far greater opportunity of success. To minimize your time and optimize your value, efficiency and likelihood of securing a buyer, you will need to engage a team of advisors to zero in on a buyer and complete a transaction.

6. Team of Advisors - What is the team of advisors I will need to take me through the sale process and how do they benefit me? It is absolutely critical that you continue to manage and grow your business, keep it on track and not have any downfall in your revenues or profits if you expect to find a buyer and optimize the sale price. To enable you to do this, CEO Advisor, Inc. acts as your business and M&A advisor to:

A) Strategize, research and create a list of 200 - 300 prospective buyers
B) Create the needed materials in preparation of the sale, such as an Executive Summary, 3-Year Forecast, PowerPoint Presentation specifically for buyers, make sure your financials and tax returns are in order and current, and many other preparation steps
C) Contact the 200 - 300 prospective buyers multiple times by phone and email to arrange conference calls and meetings to secure a bonafide offer in the form of a Letter of Intent
D) Negotiate and finalize the Letter of Intent
E) Prepare for, gather and coordinate the extensive amount of Due Diligence information the buyer will require to validate your valuation and proceed with the sale
F) Coordinate with your CPA/tax advisor to ensure your tax situation is optimized
G) Coordinate the legal documents with your corporate/transaction attorney and assist you in negotiating the many business issues that arise from these documents
H) Negotiate your future compensation for after the sale
I) Prepare for the closing of the transaction and coordinate all aspects of the sale to completion. In summary, you will need an M&A Advisor, Corporate/Transaction Attorney and CPA/Tax Advisor. Remember, there are over 1,000 variables that must occur properly to close a sale, and just 1 misstep can kill the deal.

7. Valuation - How will buyers value my business? Most businesses are acquired based on a multiple of EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization). The multiple varies based on your type of company, growth rate, your gross profit margins, your profitability, the size of your market, the strength and depth of your management team, and many other factors. In some cases with technology companies, in the absence of profits, but in the presence of an extremely high growth rate, margins and size of the market, businesses may be valued on a multiple of revenue, as well as, other factors.

8. Cash at Closing - Will I receive 100% of the sale price in cash at closing? Unlike selling real estate where comparable properties are common place and basically 100% of the property can be inspected, tested and validated, a business has many variables that are fluid and cannot be validated, and comparable deals are very hard to come by.

Realistically for small to mid-size private companies, buyers will pay you 50% to 80% in cash at closing, occasionally ask you to hold 10% in stock to keep you fully vested and committed to the business, and the balance in the form of an Earn Out requiring you to meet milestones and your forecasted revenue and profits prior to paying out the balance of the sale price in cash two to four years after the closing. An all cash deal is possible, but you need to be realistic when selling your business.

9. Continued Service - Will I need to stay on with the buyer after the sale? Every situation is different, but 99%+ percent of the time, the buyer is fully expecting you to not only stay on, but help them to further grow the business. Taking your cash and heading for the beach is not realistic and this is one more reason to devise an exit strategy while you are still willing and able to work for at least 2 years after you close the sale of your business.

10. Alternatives to Outright Sale - What are the alternatives to an outright sale of my business? I speak with many CEOs and business owners and many feel that they can simply sell their business to the employees. Others want to find a person to run their business for them so the owner can move on and do other things, while pulling cash out of the business each month. These alternatives are rarely feasible in realistic terms.

The best alternative to outright selling your company is to team up with a Private Equity firm by selling a minority or majority equity stake and taking money off the table, while still having substantial upside in the ultimate sale of the balance of the business. The Private Equity firm will provide capital for you, growth capital for the business, highly experienced management help and an opportunity to ultimately sell the business at an optimal sale price. Contact Mark Hartsell, MBA, President to see if this is a fit for you and your business as I have many relationships with Private Equity firms focused on small and mid-size companies.

Selling your business is a very complex and time consuming undertaking requiring tremendous experience and expertise. CEO Advisor, Inc. has 38 years of advising some of the most successful CEOs and business owners of companies in the Southern California area. Contact Mark Hartsell, MBA, President of CEO Advisor, Inc. at (949) 629-2520,by email at MHartsell@CEOAdvisor.com or visit us at www.CEOAdvisor.com for a no cost, no obligation initial consultation today.
Source: Excerpt from the Philadelphia Business Journal, Aug 9, 2018
I'm a big believer in career advisors. For one thing, they help drive measurable and positive outcomes. That's clear from a wide range of studies over many years on the subject. Advisors, coaches, mentors - however you label them - have been found to improve competitiveness and leadership development.
A review of 25 years' worth of research on mentoring, published in the Journal of Vocational Behavior, found mentors "improve career outcomes for individuals. My own experience confirms all these findings." 
The type of relationship or counsel you are looking for also evolves over time. Ironically, many people abandon these sorts of partnerships as they climb the corporate ladder. They feel they can go it alone, but I am a firm believer in leadership under advisement. 
Early on in my career, I sought out coaches or mentors. As I rose through the executive ranks, and especially as a CEO, the stakes became higher and I sought out trusted advisors - individuals who sat outside of the organization that I could safely and confidentially bounce ideas off of and get insights from, in addition to my management team. These people continue to round out my thinking and help me navigate through challenging situations, prioritize opportunities, and improve performance.
When it comes to advisors, the duration of the relationship is an important factor. There can be people in your professional life who make a distinct impression. A great orator, a wise elder, or a paid consultant that gives you sound advice.
But, in my experience, when it comes to making an indelible mark on your career, finding a person who you implicitly trust, who truly understands your strengths and weaknesses, who pushes you to be accountable, who you are willing to take constructive feedback from, and who can be a thought partner - well, that doesn't happen overnight. That builds gradually and requires investing time and energy and deliberation. It's a relationship where there is no agenda other than making you the best you can be and reinforcing it through remarkable results.
I've been fortunate to have several long-time advisors. One of them has been working with me for many years as an executive coach. His role at that time was to help us think through executive leadership, transformation, and value-driven outcomes. I remember one of the first things that struck me that he was a "strategy guy," with strong business acumen and a hard drive for accountability and results. 
He asked thought-provoking questions, always pushed for more, challenged the status quo and was all about partnering to achieve the best outcomes for the organization. As a senior executive in the company, I quickly came to value him as a resource to help think through some of the complex issues we were facing. The relationship evolved to trusted advisor.
His experience is diverse. He was a Marine Captain and has worked for a range of Fortune 100 companies, such as Pepsi, GE and Citigroup, as well as smaller companies, including a recent one in the medical devices industry where he led the build-out of a top-tier domestic and international organization. His vast experience across a variety of highly competitive industries informs his keen insights, intuition and advice on business and cultural issues - all of which have been invaluable to me. 
While nothing fully prepares you for the challenges of being a chief executive, having a business advisor when the going gets tough or to just to be a thought partner is an enormous plus. Our always-evolving, never-ending agenda is building "a remarkable organization" and keeping it remarkable as dynamics change. 
Very few companies consistently outperform over long periods, so setting out to do so means you have to strategically beat the odds. It's a fluid and complex process - you have to get the right team and culture in place, set forth a clear strategy that the team can execute against, establish goals with measurable outcomes, and learn how to navigate and best serve a diverse group of stakeholders with different agendas. 
As time goes on and new opportunities and challenges constantly present themselves, organizations and cultures need to be rethought and assessed. It's important to have someone who is not ingrained with the day-to-day team, that you trust, to help you think through these issues, challenge you, and provide critical insight.
I'm enormously grateful for the impact my business advisor has made - and continues to make - in my professional growth as a trusted confidante. I now take elements I have learned from him and use it with others who are looking to grow as leaders. Whatever stage you're at in your career, make the time to cultivate a trusted advisor. 
CEO Advisor, Inc. has 38 years of advising some of the most successful CEOs and business owners of companies in the Southern California area. Contact Mark Hartsell, MBA, President of CEO Advisor, Inc. at (949) 629-2520,by email at MHartsell@CEOAdvisor.com or visit us at www.CEOAdvisor.com for a no cost, no obligation initial consultation today.
7 Ways CEOs Can Continuously Improve Their Performance 
Continuous improvement is vital to performing optimally as a CEO. The best ones make time for it, because they see it as an investment in themselves and their company that will pay off in real dollars now and down the line. So what specifically can you do as a CEO to improve your skills and performance? Here are 7 ways. 
1) Attend Training Programs: For the past several years I have given an annual seminar on the CEO position. The biggest excuse I hear from CEOs for not attending is that they don't have time. From my experience the CEOs who do attend are typically the ones who are already better than most. Because of this, they know how to make time to improve their skills. If you think you don't have time to get better at your job, then you are not doing your job properly.
2) Read Books: CEOs who take the time to read about the experiences of other chief executives and other business leaders have an advantage. While the advice may not be perfect for every situation, I can tell you that I almost always come away from reading a top-rated business book with a couple of ideas that make a difference in my businesses.
3) Write Some Content: Writing forces you to clarify your thoughts in a way that is highly beneficial for future action. Taking the time to write a regular email to your company explaining your thoughts and actions can do a lot to improve your thinking as well as align the team with your vision. Many CEOs have begun a regular blog to comment on issues they find interesting. Formalizing your writing schedule will pay big dividends as a CEO.
4) Meet with Wise People: As a CEO it is part of your job to find people from outside your company who can bring knowledge and experience to bear on your problems. Make an effort to get to know people in your community who have relevant experience. Seek out the other leaders in your industry to establish relationships. Many times the relationships I formed within my industry provided tremendous value to the company.
5) Study Yourself: Learning about yourself, how you think and react, is critical to developing as a CEO and overcoming your internal biases. There are many different self-assessments tools available - from Myers-Briggs to Marcus Buckingham and Donald O. Clifton's strengths-based assessment. Many firms specialize in this area and may offer a free interpretation of your results. If you find one you like, extend it to your employees so you have a common language to address personality issues across your entire team.
6) Gather Feedback: If you are not getting feedback about your performance, then you have a problem. It is not enough to just ask for feedback and hope it comes to you. You should actively solicit feedback both from your employees as well as your board or outside advisors. Getting feedback from employees will often require an anonymous feedback mechanism or third-party gatherer. Feedback from your board should be both informal and formal as well as on a regular schedule.
7) Seek out Mentors and Advisors: Reach out to those who have gone before you to gain from their expertise and experience. The CEO job is unique, so make sure you have people in your circle who have been in the chair and know the challenges of the job. Avoiding lost time and missteps converts to big dollars in your pocket.
If you are not improving your knowledge and experience, you are letting the company down. Don't be the CEO who keeps doing the same things over and over and wonders why he/she doesn't get different results.
To learn how to achieve better results, accelerate sales, increase profits and increase shareholder value, call Mark Hartsell, MBA, President of CEO Advisor, Inc. at (949) 629-2520 for a no cost initial consultation. 
Talent Fueling Innovation; Innovation Fueling Growth

Nick Newsom and Ytel, Inc. have been a valued client of CEO Advisor, Inc. for the past 5 years. Our work together along with the Private Equity funding secured by CEO Advisor, Inc. has been exciting and extremely prosperous for Ytel and its shareholders.


Nick Newsom founded Ytel in 2012 to help businesses better interact with customers through self-service software. Newsom also recruited top employee talent to help propel Ytel to the next level. "We really believed in the idea that complex software didn't have to be a burden or take months to be implemented," explains Newsom.


Newsom's vision and his company's pathbreaking work has paid off: Ytel has received 

congressional recognition for innovation in cloud communications as it has reached the milestone of 10 billion interactions on the Ytel network in a single year.


The company, meanwhile, has been selected by Entrepreneur magazine as one of America's fastest growing companies. In only four years, Ytel has grown from just a half a dozen employees to more than 100, necessitating a new 30,000+ square foot, state-of-the-art headquarters, supported by several other offices across the country to service customers.


Still leading from the cutting edge, Newsom is now focused on changing how companies use CPaaS (Communication Platform as a Service). "2018 has been a pivotal year for our company and Ytel is looking forward to continued growth and releasing exciting new innovations in 2019."


About Ytel, Inc.
Ytel is a leading edge software company that helps businesses engage more customers using voice, SMS, social, email, mail, and messaging from a single platform. Product and Marketing teams can quickly add new communications channels to existing software, increase qualified leads, and extend the customer lifetime value by giving prospects and customers the ability to compliantly engage when and how they choose. Founded in 2012, Ytel delivers more than 1 billion monthly messages to help businesses grow revenue and brand equity. For more information on Ytel, visit http://www.ytel.com.


About CEO Advisor, Inc.
CEO Advisor provides business consulting, funding and mergers and acquistions advisory services to CEOs and business owners of small to mid-market companies.

Contact Mark Hartsell, MBA, President of CEO Advisor, Inc. at (949) 629-2520 or by email at
MHartsell@CEOAdvisor.com for a no cost initial consultation.

Testimonial 


"I've worked with Mark on multiple client engagements over the last several years. We have worked on transactions including a technology asset acquisition, preparing an operating business for sale and the turnaround of a distressed business. Mark provides his clients with expert advice and counseling. He is great at developing a big-picture plan, and doing the work and providing the direction to implement it. Mark is a good communicator, very responsive and easy to work with."

Corporate Transaction Attorney
"As a President of a mid-size technology company, I have been very pleased with the services provided by CEO Advisor®. He contributed in many areas, but identified marketing and sales as our primary need. His guidance and contributions have been invaluable in establishing and maintaining a meaningful marketing and sales program for the company. He is a knowledgeable business advisor and a pleasure to work with."
CEO/President, Engineering Services/Manufacturing Company


Whether it is growing a business to the next level, turning a distressed company around or preparing a company for an exit, Mark's firm, CEO Advisor, Inc, provides a broad range of services and Mark is there for the CEO every step of the way."

 


Partner

Haynes & Boone, LLP

Words of Wisdom


"Yesterday does not equal tomorrow. Forget the past and move towards your goals."


Anthony Robbins 
Motivational Speaker