CEO Advisor Newsletter November 2022
The Key to Selling Your Business in a Recession
- There is one thing we can all agree on – valuations of businesses have peaked and it makes great sense to move now on selling your business unless you can wait 7 – 10 years to rebuild last year’s peak values back into your business. Urgency in executing on your exit strategy is paramount and will serve you well vs. waiting until the second half of 2023 or 2024 to start to sell your company.
- Businesses are sellable during a recession, but there should be special attention and focus on certain aspects of the sale that are even more critical in a slowing or down economy. CEO Advisor, Inc. has decades of experience and expertise in mergers and acquisitions as an M&A Advisor, and the three primary drivers of completing a transaction are: 1) Preparation work with an M&A Advisor to demonstrate value to optimize the price and terms, 2) Engaging in a competitive sale process for an M&A Advisor to provide outreach to a broad range of buyers and to generate urgency among these prospective buyers and 3) Positioning the company and managing the sale process to get a transaction done when buyers are fewer and less active in pursuing deals due to a down economy.
- Unless you were an investment banker in a prior life, this is no time to sell your business on your own (and even if you were it is prudent to have a third party sell your business). The fees that you will pay to an M&A Advisor will generate a tremendous return on your investment, save you a tremendous amount of time to remain focused on growing your business, an M&A Advisor will provide tremendous expertise in order to successfully sell your business, and will most assuredly generate a far higher sale price with tremendously better terms (that may represent millions of additional dollars alone in some transactions).
- The value of your business is driven by multiple factors and the cumulative effect of these factors will either attract or repel buyers, and enhance or diminish value. Below are 10 key drivers of both value and getting a transaction done, especially in a recession:
- 1. Growth Rate – Year-Over-Year (YOY) substantial growth is essential to demonstrating value.
- 2. Revenue Amount – Size does matter in M&A.
- 3. Gross Profit Margin (GPM) – GPM is a vital metric to produce a strong bottom line.
- 4. Management Team – Your management team is critical to growth and value.
- 5. Size of the Market – Again, size matters and a large market is highly preferable.
- 6. Sales Team – A strong, goal-oriented sales team is critical to continued growth.
- 7. Sales Pipeline – A strong sales pipeline in a well managed CRM is paramount.
- 8. Customer Growth – A steady, growing set of customers with low cancellations (churn).
- 9. Net Profits – Profitability in a down economy is more important than ever.
- 10. Year-Over-Year (YOY) Profit and EBITDA Growth – Bottom line growth fuels the value of your business.
- If your business is not firing on all of these key drivers, it doesn’t mean that you shouldn’t sell your company – it means that you should engage with a business advisor and spend 6 months to focus on growth and improving your business and then re-assess selling your business. CEO Advisor, Inc. has spent 18 years with CEOs providing growth and strategy advisory services to grow businesses to the next level.
- If your business is firing on most or all of these 10 key factors above, then you simply need to engage with an M&A Advisor such as CEO Advisor, Inc. to focus on:
- a) Preparation work for 2 to 3 months to create a Data Room to position your business for the optimal price and terms
- b) Ensure that your M&A Advisor has a comprehensive list of prospective buyers to provide outreach to for a competitive sale process
- c) Assist the M&A advisor in negotiating and securing a signed LOI with a strong price and terms
- d) Assist the M&A Advisor with information to satisfy the Due Diligence process
- Work with your corporate / transaction attorney and M&A Advisor on the legal and business issues in the legal contracts
- e) And most importantly, remain focused on your business throughout the competitive sale process, while your M&A Advisor sells the company, in order to maintain a strong business and financials.
- Contact Mark Hartsell, MBA, President of CEO Advisor, Inc. at (949) 629-2520, by mobile phone at (714) 697-3370, by email at MHartsell@CEOAdvisor.com, or visit us at www.CEOAdvisor.com for more information.
With Changing Market Conditions, Now May be the Right Time to RIGHTSIZE
- During these difficult and uncertain times, a proactive, trusted business advisor with experience and expertise in rightsizing companies can be extremely valuable. To establish whether rightsizing is right for your business, it's important to objectively address your situation and your company.
- Have internal and external factors caused your needs and objectives to change? Is your management team equipped with the right skills to address the many variables you must manage today? Answering these questions can help you determine if rightsizing will properly address your needs.
- Rightsizing requires experience, expertise, planning and a sense of urgency. It also requires fortitude and making very tough decisions timely. Rightsizing also requires companies to eliminate any duplication of work so that the company is running efficiently and without redundancies. It also enables the company to more effectively plan for the future and meet its strategic objectives both short-term and long-term.
- Whether you need to reduce costs and expenses, reduce your workforce, reorganize certain aspects of your business or need help addressing your capital needs, CEO Advisor, Inc. can assist you in achieving your goals. The key is to quickly position the company to maintain profits and shareholder value, and to not waste time.
- CEO Advisor, Inc. provides affordable, hands-on, goal-driven, trackable business advisory services to CEOs, presidents and business owners of small and mid-size businesses to ensure results. We have access to capital, and will quickly implement best practices coupled with definitive planning and strong decision making to greatly improve your business.
- This is the time to be proactive and gain the help you need. CEO Advisor, Inc. has helped hundreds of CEOs, presidents and business owners achieve their goals and change their lives dramatically over the past 18 years.
- CEO Advisor, Inc. specializes in advising on all aspects of growth for small and mid-size businesses. Our mission is to grow your business to the next level. Contact Mark Hartsell, MBA, President at MHartsell@CEOAdvisor.com, call (949) 629-2520, by mobile phone at (714) 697-3370 or visit www.CEOAdvisor.com for more information.