CEO Advisor Newsletter May 2016
Finding (And Keeping) Valued Advisors For an Optimal Exit
Engaging The Right Advisors. CEO Advisor, Inc. is a business advisory, growth capital and mergers and acquisitions specialty firm that works exclusively with CEOs, presidents and business owners. Our specialty, focus and expertise is a critical aspect of growing your sales, profits and value of your business for an optimal exit. Your corporate attorney, CPA and tax advisor, as well as, your insurance and banking advisors are also extremely important to your success.
Clear Goals. Your engagement with a business advisor should include a set of clearly defined, written goals, time-frame for achieving the initial goals, hours to be committed monthly by the advisor for a fee or monthly retainer, along with regularly scheduled meetings and conference calls in a clearly stated engagement agreement.
Run on all Cylinders. No matter how ambitious or talented a CEO, president or business owner may be, it is extremely hard to cover all aspects of business in today's complex environment, which costs you a tremendous amount of time and money. This is why all business owners need sound, seasoned, trusted advice and help with executing their plan to maximize sales, profits and value for the sale of the company. Otherwise, your business may be running on only half of its cylinders at half speed.
Time is Precious. To gain needed advice and expertise, you must engage the right advisors for your business. Perhaps because of their necessity, we're prone to throwing around the term "Advisor" much too loosely. Many CEOs, presidents and business owners create a Board of Advisors and then have no idea what to do with them or do not follow-up on gaining value from them. Similarly, industry veterans agree to advise businesses without any clear sense of responsibility, continuity or hands-on advice with substantial work performed. Group coaching can be a major waste of time and money as 90% of the time is spent on someone else's problems from other industries.
Hands-on Work and Expertise. An Advisor should be much more than a mentor or coach. A trusted advisor is a special relationship between a business and a third party expert with a specific value or expertise working on a written set of goals and deliverables on a weekly basis.
Your advisors must roll up their sleeves and invest the needed time to serve the business properly, and the business must invest time and money into the relationship in order to ultimately achieve these goals. Otherwise, your goals may be out of reach for many months or years costing the business tremendously in lost sales, lost opportunities, lost profits and diminished value or the inability to sell the company at all. CEO Advisor, Inc. works with well defined, written goals conducting weekly meetings with agendas based on these goals and needs of the CEO, while performing a tremendous amount of work that is instrumental in achieving the CEO's goals.
Communicate. Ask for the help you need and then maintain open communications with your advisors and expect your advisors to be direct and to the point with you. This is important for several reasons and will serve you well as you build your business. According to Guy Kawasaki, Entrepreneur, Former Apple Chief Evangelist, & Author of Enchantment, "If you don't ask for it, you don't get the help you need. The reason you signed up an advisor is because they are successful, connected, and knowledgeable people. This means they aren't idle. If you want their help, first ask for it. You will sit by the side of a river for a long time before a roast duck will fly into your mouth."
Pay for Expertise. If you're going to ask, you should be willing to pay. Actually, you should be happy to pay. The right advisor can positively affect your business, your profits and your life tremendously. If you can generate a 25X, 50X or 100X return on your investment, you should be prepared and excited to pay a reasonable fee to gain the help you need.
Reap the Benefits. With a trusted business advisor, you should see a clear and methodical path to substantial rewards within three months. All information should be documented and the plan and goals should be pursued consistently toward success and completion. The right team of advisors will increase sales and profits, protect your assets, build your business, increase your value substantially and enable you to tremendously enhance your ability to sell your company for an optimal value for an ultimate sale and the largest payday of your life.
Take your business to the next level. Contact Mark Hartsell, MBA, CEO of CEO Advisor, Inc. today for a no cost, no obligation meeting at your office at (949) 629-2520 or email MHartsell@CEOAdvisor.com.
Making Your Company More Valuable and Irresistible to Buyers
Whether you decide to sell your company in today's hot market, or prefer to hold and grow your business further (and risk another drop in the market), there are certain key areas that you need to focus on to build value and make your business more attractive to current and future buyers. Seek advice from a business advisor that is experienced in mergers and acquisitions and that can guide you through the process with seasoned negotiating skills.
Simply stated, make your business irresistible to strategic buyers and private equity firms. A strategy to make your business irresistible to prospective acquirers may generate the greatest return in your life time. After all, I tell our clients on a regular basis, you never know when the perfect buyer will knock on your door. Now (and on-going) is the time to prepare for the sale of your business - especially when this will also result in higher sales and profits along the way.
Below are key factors that you must employ in your business to build value, make your company sellable and attractive to current and future buyers.
Growth RateThe growth rate of your business is critical to the value of your business and the attractiveness of an acquirer. Businesses that grow at 10% - 15% per year are not attractive to buyers given the many other options they have to acquire faster growing businesses. If your growth rate is slow or stagnant, there are issues that you need to address in your business if you expect to A) maximize your profits and B) exit at some point in the future. This key factor applies to all types of businesses all the time.
Size of Your Company and the Markets You ServeCompanies that are dedicating people and resources to acquiring other companies tend to focus on larger companies. It takes just as much (actually more) time to secure a buyer and perform an acquisition on a small company than it does to acquire a mid-size or large company.
Acquirers are looking for revenue and profits that will move the needle on their business. They want strong management, large markets served for future growth and revenue that is substantial and predictable. Kick into growth mode to generate your golden opportunity to sell.
Recurring RevenueIf you are only as good as your last project, you are in trouble today. Acquirers see value in recurring, contracted revenue. Not just loyal customers that buy semi-regularly, but a strategy and business model with long-term, contracted customers that is forecastable and predictable. Not all customers need to be this sure bet, but you need to have a business that has sticky products and services and staying power to attract buyers in order to have them pay you handsomely for your many years of hard work.
Gross Profit and Gross MarginsYour Gross Profit Margin (GPM), or Sales less Cost of Goods Sold divided by Sales, is the number one factor that points to the profitability of providing your product or service (before overhead/expenses). Acquirers are attracted to businesses with high GPM as this will typically result in high Net Profit, Net Profit Margin and Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA).
Depending on your type of business (manufacturing vs. services vs. software have very different Gross Profit Margins), you need to have GPM that is at or higher than other companies in your industry to optimize your value. If your Gross Margins are low, seek advice from a business advisor as you are leaving a lot of profits on the table, as well as, penalizing your business value substantially.
ManagementStrong management is a key factor in running and growing a sustainable business that is attractive to buyers. Interim management (business advisors, CPAs, attorneys, etc.) work well for smaller companies until they reach a certain size where permanent management team members can be hired. If you are the lone senior executive in your company, you need to reposition things to enable growth and build value in your business.
Mergers & Acquisitions AdvisorIn my last deal, the buyer thanked me for being involved and making the deal come together. He stated that without an M&A advisor, they simply can't get deals done. He added that CEOs and business owners frankly don't have the time, expertise, perspective, deal knowledge and process orientation to get through an acquisition and it is a shame. Buyers pass on many opportunities due to these factors, especially given the many owners that actually want to sell but sabotage their own exit because the owner or CEO doesn't have the experience, expertise or time to manage and negotiate the sales process.
CEO Advisor, Inc. has decades of expertise in hands-on advising of CEOs, presidents and owners of small and mid-size businesses, including building value and buying and selling companies. Contact Mark Hartsell, a trusted business advisor, today for a no cost initial consultation by calling (949) 629-2520 or emailing MHartsell@CEOAdvisor.com.