December 2025 Newsletter
7 Critical Things to Know Before Selling Your Company
Selling a business is never a straight forward process. However, the upside can be a life-changing event. When you do decide to sell, there are seven key things you need to know that will help you prepare and optimize your value and chances of a successful exit.
Getting it wrong can ruin your opportunity of a sale and can mean many months, or even years, of wasted time and a major lost opportunity. Red flags will be detected by experienced buyers and they will quickly pass on acquiring your business.
1. Don't Live in the Past
The previous success of your business (three or more years prior) is largely irrelevant at the time of sale, especially if it has been struggling in the last year. Buyers are interested in recent performance (Valuations are based on the trailing twelve months or TTM) and future sustainability and viability including your current Forecast and Sales Pipeline of opportunities in your sales customer relationship management (CRM) software. Failing to grasp this concept will be very costly and waste a lot of time.
2. Buyers Won't Pay More for Potential
The valuation determined by buyers for the potential sale of your business will be based on the trailing twelve months (TTM) X an EBITDA (Earnings Before Interest, Taxes, Depreciation & Amortization) multiple. I regularly speak with CEOs who believe they have a potential "Home run" in the coming year and expect to command a top sale price based on perceived potential alone or a big Forecast. Buyers are cautious when placing a value on the future. If a fifteen year old business did $10 Million in sales last year, with $900,000 in EBITDA, the value will be primarily based on the TTM EBITDA times an EBITDA multiple in the eyes of the vast majority of potential buyers, despite your lofty Forecast for $15 Million in Sales and $3 Million in EBITDA this coming year. Present value to prospective buyers every step of the way, but be pragmatic at the same time on how your company is valued.
3. Buyers are Interested in Profits, Not Just Revenue
Another common misconception is that buyers are easily impressed with Revenue figures. This holds true with SaaS software companies, but only to a certain degree. Revenue always sounds good, but when it comes down to it the only number that really matters in the great majority of M&A transactions is the Net Profit and especially the EBITDA a business generates. Experienced business buyers want to see Net Profit and EBITDA, not just Revenue. Revenue of $30 Million or more will attract them as a potential buyer by demonstrating growth, but the EBITDA is primarily the factor for valuation.
4. Buyers Will Verify All Information in Due Diligence
Prior to launching a sale process, you need to prepare a virtual Data Room to provide the initial information to prospective buyers. Once a buyer is secured and an offer is finalized, the tedious Due Diligence process will commence to verify a lot of seller information in a 30 - 45 day period. Due Diligence requires expertise, organization and preparation. You will not progress to the next step of the sales process - the legal agreements - until you pass the Due Diligence phase. And the key to Due Diligence is avoiding any renegotiations of the LOI (or a "Retrade") or a pass by the buyer altogether.
5. Be Both Expeditious and Patient
The sale of your business will be extremely time consuming and require a lot of experience and expertise. You want to keep the sale process on track and make progress on a daily and weekly basis. Otherwise, the sale process will drag on and an excessive amount of your time will be consumed and expenses will mount up quickly. At the same time, show poise, professionalism and patience as this buyer is your future employer. An M&A advisor is critical to lead and manage the sale process due to the time and expertise required to consummate a transaction, and to be your "Bad Cop" while you remain the “Good Cop” during the sale process.
6. Be Honest, Flexible and Extremely Prudent
The truth will prevail and you need to build trust with the buyer. Experienced buyers understand that every business is going to have positives and negatives. There is no such thing as a perfect business so the best method is to be transparent and respond timely to the buyers requests, while presenting value at every opportunity. If you are honest and transparent from the start there is less risk of a deal going sour because the buyer uncovered something during Due Diligence that wasn't accurate or an instance where the truth was stretched. Honesty is the best policy in all business transactions and selling your business is no different.
With that, you must be very prepared and prudent in how you present the information as real value to buyers to get the results you desire. Again, an M&A advisor should manage and lead the sale process, as well as, communicate with the buyer on your behalf given the experience and expertise needed to navigate a sale to closing.
7. You Need an Experienced M&A Advisor to Ensure a Successful Sale
The goal is to consummate a sale at an optimal price and terms. This will require the experience, expertise and a tremendous amount of time invested by an M&A Advisor - from the preparation leading up to the sale, the outreach and securing a buyer, conducting the Due Diligence process, working along side your corporate transaction attorney and CPA, advising the CEO through the entire process and keeping the sale on track all the way to the closing.
CEO Advisor, Inc., is an M&A advisory firm with over 75 years of M&A experience. 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.
Getting it wrong can ruin your opportunity of a sale and can mean many months, or even years, of wasted time and a major lost opportunity. Red flags will be detected by experienced buyers and they will quickly pass on acquiring your business.
1. Don't Live in the Past
The previous success of your business (three or more years prior) is largely irrelevant at the time of sale, especially if it has been struggling in the last year. Buyers are interested in recent performance (Valuations are based on the trailing twelve months or TTM) and future sustainability and viability including your current Forecast and Sales Pipeline of opportunities in your sales customer relationship management (CRM) software. Failing to grasp this concept will be very costly and waste a lot of time.
2. Buyers Won't Pay More for Potential
The valuation determined by buyers for the potential sale of your business will be based on the trailing twelve months (TTM) X an EBITDA (Earnings Before Interest, Taxes, Depreciation & Amortization) multiple. I regularly speak with CEOs who believe they have a potential "Home run" in the coming year and expect to command a top sale price based on perceived potential alone or a big Forecast. Buyers are cautious when placing a value on the future. If a fifteen year old business did $10 Million in sales last year, with $900,000 in EBITDA, the value will be primarily based on the TTM EBITDA times an EBITDA multiple in the eyes of the vast majority of potential buyers, despite your lofty Forecast for $15 Million in Sales and $3 Million in EBITDA this coming year. Present value to prospective buyers every step of the way, but be pragmatic at the same time on how your company is valued.
3. Buyers are Interested in Profits, Not Just Revenue
Another common misconception is that buyers are easily impressed with Revenue figures. This holds true with SaaS software companies, but only to a certain degree. Revenue always sounds good, but when it comes down to it the only number that really matters in the great majority of M&A transactions is the Net Profit and especially the EBITDA a business generates. Experienced business buyers want to see Net Profit and EBITDA, not just Revenue. Revenue of $30 Million or more will attract them as a potential buyer by demonstrating growth, but the EBITDA is primarily the factor for valuation.
4. Buyers Will Verify All Information in Due Diligence
Prior to launching a sale process, you need to prepare a virtual Data Room to provide the initial information to prospective buyers. Once a buyer is secured and an offer is finalized, the tedious Due Diligence process will commence to verify a lot of seller information in a 30 - 45 day period. Due Diligence requires expertise, organization and preparation. You will not progress to the next step of the sales process - the legal agreements - until you pass the Due Diligence phase. And the key to Due Diligence is avoiding any renegotiations of the LOI (or a "Retrade") or a pass by the buyer altogether.
5. Be Both Expeditious and Patient
The sale of your business will be extremely time consuming and require a lot of experience and expertise. You want to keep the sale process on track and make progress on a daily and weekly basis. Otherwise, the sale process will drag on and an excessive amount of your time will be consumed and expenses will mount up quickly. At the same time, show poise, professionalism and patience as this buyer is your future employer. An M&A advisor is critical to lead and manage the sale process due to the time and expertise required to consummate a transaction, and to be your "Bad Cop" while you remain the “Good Cop” during the sale process.
6. Be Honest, Flexible and Extremely Prudent
The truth will prevail and you need to build trust with the buyer. Experienced buyers understand that every business is going to have positives and negatives. There is no such thing as a perfect business so the best method is to be transparent and respond timely to the buyers requests, while presenting value at every opportunity. If you are honest and transparent from the start there is less risk of a deal going sour because the buyer uncovered something during Due Diligence that wasn't accurate or an instance where the truth was stretched. Honesty is the best policy in all business transactions and selling your business is no different.
With that, you must be very prepared and prudent in how you present the information as real value to buyers to get the results you desire. Again, an M&A advisor should manage and lead the sale process, as well as, communicate with the buyer on your behalf given the experience and expertise needed to navigate a sale to closing.
7. You Need an Experienced M&A Advisor to Ensure a Successful Sale
The goal is to consummate a sale at an optimal price and terms. This will require the experience, expertise and a tremendous amount of time invested by an M&A Advisor - from the preparation leading up to the sale, the outreach and securing a buyer, conducting the Due Diligence process, working along side your corporate transaction attorney and CPA, advising the CEO through the entire process and keeping the sale on track all the way to the closing.
CEO Advisor, Inc., is an M&A advisory firm with over 75 years of M&A experience. 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.
Bottom Line - When to Sell a Business. There will come a time when you will want or need to sell your company. The right time to sell a business is based on various reasons, such as economic conditions, industry trends, valuations, personal situations, and professional considerations, but most of all you want to sell when, 1) The economy is healthy, 2) Your business is healthy and sales are increasing, and 3) You, the CEO/business owner is healthy.
This is one of the most important decisions you may make in your life. 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.
This is one of the most important decisions you may make in your life. 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.
Making Your Company More Valuable and Attractive to Potential Buyers
Do you remember 2008? How soon the markets forget. Back then you couldn't give away most real estate, and business valuations plummeted with very few buyers and minimal mergers and acquisitions (M&A) activity.
Valuations have fully recovered and are extremely high again, and M&A activity is strong. Today, one of the limiting factors of deals getting done are CEOs and business owners that demand high prices for companies that are out of touch with the market. The market has shifted somewhat and sellers need to be educated on these trends.
Whether you decide to sell your company in today's 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.
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. And even if a buyer comes knocking, don't go down the path of a single buyer - this can actually box you in and will not be a competitive sale process that will yield the best price and terms.
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 Rate
The growth rate of your business is critical to the value of your business and the attractiveness of an acquirer. Small to mid-size businesses that grow at 10% 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 exit at some point in the future. This key factor applies to all types of businesses all the time, and a business advisor such as CEO Advisor, Inc. will help you to accelerate your growth.
Size Matters
Buyers that are dedicating people and resources (their M&A team) to acquiring other companies tend to focus on larger companies. It takes just as much (actually more) time to acquire a small company than it does to acquire a mid-size or large company.
Acquirers are looking for Revenue and Net Profits that will move the needle of their business. They want strong management, large markets served for future growth, and Revenue that is substantial, recurring and predictable. Kick into growth mode to increase sales, profits, the value of your business, and to generate your golden opportunity to sell.
Recurring Revenue
If 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 staying power to attract buyers and have them pay you handsomely for the customers you have secured and for your many years of hard work.
Gross Profit and Gross Margins
Your 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. service vs. software have very different Gross Profit Margins), you need to have a 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.
Management
Strong management is always 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 and mid-size companies until they reach a certain size where a full permanent management team can be hired. If you are the lone senior executive in your company or your management team is lacking a full realm of expertise, you need to gain additional expertise and experience from a seasoned business advisor to help you grow and build value in your business in advance of an optimal sale.
CEO Advisor, Inc. has decades of experience and expertise in hands-on advising of small and mid-size businesses, including growth and strategy, building value and buying/selling companies.
Contact Mark Hartsell, MBA, President of CEO Advisor, Inc. for a no cost initial consultation 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.
Valuations have fully recovered and are extremely high again, and M&A activity is strong. Today, one of the limiting factors of deals getting done are CEOs and business owners that demand high prices for companies that are out of touch with the market. The market has shifted somewhat and sellers need to be educated on these trends.
Whether you decide to sell your company in today's 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.
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. And even if a buyer comes knocking, don't go down the path of a single buyer - this can actually box you in and will not be a competitive sale process that will yield the best price and terms.
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 Rate
The growth rate of your business is critical to the value of your business and the attractiveness of an acquirer. Small to mid-size businesses that grow at 10% 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 exit at some point in the future. This key factor applies to all types of businesses all the time, and a business advisor such as CEO Advisor, Inc. will help you to accelerate your growth.
Size Matters
Buyers that are dedicating people and resources (their M&A team) to acquiring other companies tend to focus on larger companies. It takes just as much (actually more) time to acquire a small company than it does to acquire a mid-size or large company.
Acquirers are looking for Revenue and Net Profits that will move the needle of their business. They want strong management, large markets served for future growth, and Revenue that is substantial, recurring and predictable. Kick into growth mode to increase sales, profits, the value of your business, and to generate your golden opportunity to sell.
Recurring Revenue
If 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 staying power to attract buyers and have them pay you handsomely for the customers you have secured and for your many years of hard work.
Gross Profit and Gross Margins
Your 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. service vs. software have very different Gross Profit Margins), you need to have a 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.
Management
Strong management is always 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 and mid-size companies until they reach a certain size where a full permanent management team can be hired. If you are the lone senior executive in your company or your management team is lacking a full realm of expertise, you need to gain additional expertise and experience from a seasoned business advisor to help you grow and build value in your business in advance of an optimal sale.
CEO Advisor, Inc. has decades of experience and expertise in hands-on advising of small and mid-size businesses, including growth and strategy, building value and buying/selling companies.
Contact Mark Hartsell, MBA, President of CEO Advisor, Inc. for a no cost initial consultation 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.
An Acquisition growth strategy can also be risky, but not as risky as a Diversification strategy. One reason is that the products and market are already established in an operating company with an Acquisition strategy. A company must know exactly what it wants to achieve when using an Acquisition strategy, mainly because of the investment required to implement it.
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, as well as, advise you through the ultimate sale of your company.
Contact Mark Hartsell, MBA, President of CEO Advisor, Inc. for a no cost initial consultation 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.
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, as well as, advise you through the ultimate sale of your company.
Contact Mark Hartsell, MBA, President of CEO Advisor, Inc. for a no cost initial consultation 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.
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