Call

(949) 629-2520

CEO Advisor® Newsletter
September 2019
Optimizing the Price and Timing When Selling Your Business
Selling a business is serious business and is the most popular exit strategy for CEOs and business owners. 

Following these tips for selling a business will help to ensure that you secure the best price and that your business sells. CEO Advisor, Inc. has tremendous experience in selling companies, and you should seek advice from an M&A advisory firm such as CEO Advisor, Inc. if you are contemplating a sale.

Sell at the Right Time for the Right Reasons

Common reasons for selling a business include:

A) A well-planned exit by the CEO that culminates in selling to a strategic buyer or Private Equity firm
B) Optimizing the price by timing a strong economy and coming off of a strong year
C) Selling a majority of the business to a Private Equity firm to realize the majority of the value now, while continuing to grow the business with the PE firm's expertise and financial backing to realize the ultimate sale (second bite of the apple) 3 to 7 years in the future
D) Distressed sales that happen for a variety of reasons, including lack of management, mismanagement, holding onto the business too long, disruptive changes in the industry, etc.
E) Unfortunately, the most common reason for selling a company is that a CEO or owner becomes ill or too old to continue managing the business adequately, which is the worst time to be selling. It is extremely difficult to deal with the additional stress of selling a business in this situation, and the buyer will use your circumstances as leverage against you.

Determine What Your Company Is Actually Worth

Your business is worth what a willing buyer will pay in the current marketplace. Determining a realistic price range is key. There are several business valuation methods ranging from valuing the assets and goodwill value of the business; Discounted Cash Flow (DCF) method; Market Value / Comparables method; and the very common Trailing Twelve Months (TTM) Multiple of EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) or Multiple of Revenue (for most software companies).

Other factors such as the quality of your management team, growth rate, gross profit margins, intellectual property and the current market and economic conditions also influence the price a buyer will be willing to pay. Your M&A Advisor or a professional valuation company can help you in determining the valuation range of your business for planning purposes.

Get Professional Help From a Team of Advisors

Selling a company is a far more complex transaction than selling a house or commercial building, which entails a multiple listing, showings, standard contract, 1 day inspection, financing, if needed, closing documents and a closing - and the land or building will not change over time. 

Selling a business, which is a living, ever-changing group of intangible and tangible assets, employees, domain expertise, processes, products/services, on-going sales and marketing needs, vendors and customers all in a complex entity that can change dramatically overnight. Besides providing the necessary expertise to guide you through the selling process, bringing in professional advisors can help you maintain the emotional distance and objectivity you need to successfully sell your business, while enabling you to stay focused on running your business and continuing to achieve your Forecast.

Which professional advisors should you hire?

  • An M&A Advisor, such as CEO Advisor, Inc., is critical to planning and driving the sale process forward. Your M&A advisor should be extremely experienced with the expertise needed to prepare you and your business for the sale, create a list of targeted buyers, communicate with and secure offers, perform the complete Due Diligence process and lock in the buyer to commence the legal documents phase, as well as, advise you on the business aspects of the legal contracts through to the closing.
  • A corporate / transaction attorney is also critical and can draw up and/or review the many custom legal documents necessary to sell your business.
  • A strong tax advisor or CPA is also important to optimize the dollar amount that lands in your bank account. 

Prepare for the Sale to Optimize Price

Preparation for the sale is critical and your M&A Advisor will draft all of the information needed to present your business properly to optimize the price and get a transaction done. This may take two months or so but may be the best 2 months that you spend in order to add value and attract the optimal buyer.

You also need to stay focused on your business and continue to achieve your Forecast. This will require time management like never before as you will be expected to participate in the sale process on some level, while continuing to drive your business forward.  

You will also want to make sure your house is in order and this includes issues like assessing and possibly settling any pending lawsuits, as well as, ensuring your company is in good standing by making sure all tax payments are up to date.

Your M&A Advisor should also discuss with you the need for you to stay excited about the future prospects of your company after the sale, and to continue working with the company for 1 - 3 more years. Without this whole hearted commitment to the business after the sale, the great majority of buyers will simply pass.
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 more information.

CEO Advisor, Inc. Advises Q-Vio, LLC on its Sale to Orbit International
When you evaluate the management practices of hundreds of technology companies, here are the primary reasons they fail. 
Evaluate your own management decisions and practices and seek help from a business consultant or business advisor to address your
specific needs.
1. Lack of Market Focus
Emerging technology companies often do anything possible to generate revenue and in the process try to be all things to all people. Worried about losing business they avoid segmenting the market and refuse to focus on one to three key vertical markets. As a result, the company is unable to effectively serve any market segments effectively and management is suddenly swamped with support problems and competitors.
2. Undifferentiated Products
Most technology products and services that fail do so because of a lack of differentiation. Successful companies differentiate their product from all other products on the market. Differentiation is possible on the bases of five fundamental factors: function, time utility, problem solved, price and positioning. These five elements are critical to uniquely positioning your products and services to achieve success and profits.
3. Poor Market Research
Many companies routinely perform the wrong type of market research. Statistical surveys of customers alone do not provide the qualitative information that is needed. Because your target audience often relies as much on perceptions as on facts, qualitative research intended to identify existing needs has equal or greater value in assessing, planning and executing a company's marketing strategy.
4. Excessive Product Improvement
Technology products and services are generally used over an extended period of time, are integrated with complementary products and impose learning costs on customers. Customers require time to implement and recover their investment in high-tech products. The rapid introduction of new and improved versions can make a customer regret a previous purchase, delay all new purchases, and agonize over similar purchases in the future. Additionally, the time and costs related to excessive product development can delay product launches and delay sales opportunities and revenues.
5. Incomplete Products
Customers view products very differently than the technology companies that create or supply them. Technology companies tend to try to sell products on the basis of price, special features and technical specifications. These technical factors are often favored by the engineers who typically run technology companies. The problem is that most customers consider factors such as product support and company reputation to be more important. 
6. Failure to Establish the Right Competitive Barriers
Traditional barriers to competition are of little value in the technology industry. Patents can be effective but are very expensive, divulge trade secrets and take years to come to fruition. Conventional techniques are mostly designed to prevent market entry and tend not to work in technology-based businesses. The most effective competitive barriers in high-tech are the perceptions held by customers and prospects of product differentiation and first to market with a specialization in a market segment.
7. Using Price Alone to Drive Market Transformation
It is easy to misinterpret the role price plays in the market. And it is a mistake to believe that a technology product or service would be widely used and purchased if its cost was low enough. Price is a function of value and utility, and products and services should be positioned and marketed accordingly.
8. Improper Marketing
Marketing is both an art and a science. Positioning, pricing, sales strategy, target vertical markets and other factors contribute to the success or failure of your products and services and the corresponding sales. A well-crafted marketing plan is critical to success. Improper marketing or lack of marketing can be a product killer or cripple your company as a whole.
9. Sales Mismanagement
There's more to sales management than most companies realize. Specific skills are required to effectively manage each type of sales channel and those skills must be developed internally starting with an effective direct sales force. Unique management challenges exist for each primary type of sales channel: direct selling, online sales, dealers, OEMs, alliance partners and value-added resellers (VARs). Seek a business consultant or business advisor to assist you in optimizing your sales strategy as a critical factor in your success.
10. Misinterpretation of the Technology Adoption Lifecycle Model
The primary technology adoption lifecycle model describes the market acceptance of new products in terms of Innovators, Early Adopters, Early Majority, Late Majority, and Laggards. The process of adoption over time is illustrated as a classic normal distribution or "bell curve".
Because the technology adoption model is expressed in terms of a standard bell curve, it means statistically, a random sample of any given market or population must contain: 2.5% Innovators, 13.5% Early Adopters, 34% Early Majority, 34% Late Majority, and 16.0% Laggards. So no matter what industry you tend to be in, there will always be a sequence of adoption by different types of buyers.
When you evaluate the management practices of hundreds of technology companies, here are the primary reasons they fail. 
Evaluate your own management decisions and practices and seek help from a business consultant or business advisor to address your
specific needs.
1. Lack of Market Focus
Emerging technology companies often do anything possible to generate revenue and in the process try to be all things to all people. Worried about losing business they avoid segmenting the market and refuse to focus on one to three key vertical markets. As a result, the company is unable to effectively serve any market segments effectively and management is suddenly swamped with support problems and competitors.
2. Undifferentiated Products
Most technology products and services that fail do so because of a lack of differentiation. Successful companies differentiate their product from all other products on the market. Differentiation is possible on the bases of five fundamental factors: function, time utility, problem solved, price and positioning. These five elements are critical to uniquely positioning your products and services to achieve success and profits.
3. Poor Market Research
Many companies routinely perform the wrong type of market research. Statistical surveys of customers alone do not provide the qualitative information that is needed. Because your target audience often relies as much on perceptions as on facts, qualitative research intended to identify existing needs has equal or greater value in assessing, planning and executing a company's marketing strategy.
4. Excessive Product Improvement
Technology products and services are generally used over an extended period of time, are integrated with complementary products and impose learning costs on customers. Customers require time to implement and recover their investment in high-tech products. The rapid introduction of new and improved versions can make a customer regret a previous purchase, delay all new purchases, and agonize over similar purchases in the future. Additionally, the time and costs related to excessive product development can delay product launches and delay sales opportunities and revenues.
5. Incomplete Products
Customers view products very differently than the technology companies that create or supply them. Technology companies tend to try to sell products on the basis of price, special features and technical specifications. These technical factors are often favored by the engineers who typically run technology companies. The problem is that most customers consider factors such as product support and company reputation to be more important. 
6. Failure to Establish the Right Competitive Barriers
Traditional barriers to competition are of little value in the technology industry. Patents can be effective but are very expensive, divulge trade secrets and take years to come to fruition. Conventional techniques are mostly designed to prevent market entry and tend not to work in technology-based businesses. The most effective competitive barriers in high-tech are the perceptions held by customers and prospects of product differentiation and first to market with a specialization in a market segment.
7. Using Price Alone to Drive Market Transformation
It is easy to misinterpret the role price plays in the market. And it is a mistake to believe that a technology product or service would be widely used and purchased if its cost was low enough. Price is a function of value and utility, and products and services should be positioned and marketed accordingly.
8. Improper Marketing
Marketing is both an art and a science. Positioning, pricing, sales strategy, target vertical markets and other factors contribute to the success or failure of your products and services and the corresponding sales. A well-crafted marketing plan is critical to success. Improper marketing or lack of marketing can be a product killer or cripple your company as a whole.
9. Sales Mismanagement
There's more to sales management than most companies realize. Specific skills are required to effectively manage each type of sales channel and those skills must be developed internally starting with an effective direct sales force. Unique management challenges exist for each primary type of sales channel: direct selling, online sales, dealers, OEMs, alliance partners and value-added resellers (VARs). Seek a business consultant or business advisor to assist you in optimizing your sales strategy as a critical factor in your success.
10. Misinterpretation of the Technology Adoption Lifecycle Model
The primary technology adoption lifecycle model describes the market acceptance of new products in terms of Innovators, Early Adopters, Early Majority, Late Majority, and Laggards. The process of adoption over time is illustrated as a classic normal distribution or "bell curve".
Because the technology adoption model is expressed in terms of a standard bell curve, it means statistically, a random sample of any given market or population must contain: 2.5% Innovators, 13.5% Early Adopters, 34% Early Majority, 34% Late Majority, and 16.0% Laggards. So no matter what industry you tend to be in, there will always be a sequence of adoption by different types of buyers.
Q-Vio Specializes in the Design and Enhancement of LCD Display Modules

Newport Beach, CA - CEO Advisor, Inc. (www.CEOAdvisor.com), a Newport Beach, CA business consulting and M&A Advisory firm, has advised Q-Vio, LLC, a leader in the enhancement of LCD display modules, on its sale to Orbit International Corp. ("Orbit") (OTC:ORBT), an electronics manufacturer and software solution provider.
 
Q-Vio Corp. will operate as a wholly owned subsidiary of Orbit and become part of the Orbit Electronics Group ("OEG"). Q-Vio, LLC sells its products in the military, industrial, marine and broadcast marketplaces.

Ray Pronko, Q-Vio, LLC's President, will become Vice President of Marketing and Sales of Q-Vio Corp. and will operate out of Orbit's sales office in Bradenton, Florida. Additionally, Q-Vio Corp. will continue Q-Vio, LLC's practice of utilizing several manufacturing contractors in China for certain high-volume sales opportunities in order to preserve its 40% gross margin objectives.

Mark Hartsell, President of CEO Advisor, Inc., stated, "Q-Vio has a unique technology offering in the market and is a great fit for Orbit International. We are very excited that two such complimentary companies have joined together to create an even stronger product offering."

Ray Pronko, President of Q-Vio, LLC commented, "We are excited to become part of the Orbit organization and look forward to contributing to its future growth.  We believe the demand for our sunlight readable technology will also provide Orbit the ability to increase its revenues beyond the military marketplace."

About CEO Advisor, Inc.
CEO Advisor provides business consulting, growth capital and mergers and acquisition advisory services to effectively meet the specific needs of CEOs, presidents and business owners of small to mid-size companies in a wide range of industries, including software, technology, media, service firms, healthcare, manufacturing and many more. 

CEO Advisor's mission is to advise CEOs, presidents, business owners and principal executives with the needed expertise and focus, coupled with hands-on advice to grow your business to the next 
level and realize your life's dream through a successful exit.

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

Testimonial  


"Mark Hartsell and CEO Advisor provided amazing hands-on guidance from the start of the sale process through to the closing. Not having sold a company before I was not aware of the complexity, and tremendous amount of time and expertise required by someone like Mark to prepare for the sale, locate a qualified buyer, negotiate a strong offer, perform the extensive due diligence process, and drive the process through to legal contracts and closing. CEO Advisor, Inc. was the catalyst in achieving a highly successful sale."

CEO
Professional Services Company (After Their Successful Sale)

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


"The pessimist sees difficulty in every opportunity. The optimist sees opportunity in every difficulty."

Winston Churchill
Prime Minister of the U.K.