Build these six key features into your business to help you cash out
Last month, we talked about controlling what you can control to build the value of your business, whether you are selling in three months or three years. As promised, here are six more key features of a business that you can control. Take these steps and your company can be seen as a “premium acquisition.” Control your stress level, too. We’ll look at what NOT TO DO when you decide to sell.
A recent article that I wrote for Automatic Merchandiser’s Vending Today focused on the defining characteristics of a “premium acquisition.” That article, published on August 22nd, was entitled, “Your convenience services company looks great, but is it a premium acquisition? This month, I have six defining characteristics that lead to “premium acquisition” status.
In September, we talked about some of those defining characteristics – some of which are out of your control. These include:
· Where your business is located (large or smallmarket)
· The overall economic climate (a sunny or cloudyforecast can have an impact on the attitude of buyers)
We also explored four defining characteristics that you can control:
Contracts – Put yourself in the shoes of the buyer. Would you be more attracted to an operator who has handshake deals or one that has 75% of clients under contract?
Recurring income – Here is another article I wrote for reference on the topic - “While pantry service, OCS and micro market sales can be glitzy, business buyers love recurring revenue.”
Management business – In this case, less is more. Your buyer – typically a big player, knows that they can lose the account in the blink of an eye, especially if they are perceived as a threat by the national account management company.
Gross Profit – In today’s world, with inflation soprevalent, GP is critical.
With that summary of the September newsletter in front of you, as promised, here are six more defining characteristics of a business that will generate extreme interest from buyers and ultimately, a higher selling price. AKA – “A premium acquisition.”
Choosing technology - Looking back just 10 years or so, all the major players, such as Canteen, Aramark and InReach, utilized theirown internal software. Whatever system the operator (the seller) had in place was unimportant to them – it was typically discarded after the sale. That has changed today as the larger companies have now adopted the leading technological platforms for their own businesses, making the transition seamless, provided that the operator who is selling their business also has a major technology platform in place. That is why it is critical for an operator to be using prominent industry technology for VMS, payment and inventory management.
Pricing – This issue goes back to the gross profit issue that I pointed to last month. Get your pricing right, get your purchasing right – the gross profit will follow. Certainly, a company that is badly underpriced will be a “prime acquisition,” but for all the wrong reasons.
Leases – If you have a long-term view about selling your business, be a little cognizant about your building leases. That extra warehouse you added may not be a plus for a buyer that is well established in your market. Keep the sale in mind before you sign.
Visibility – Your industry “Q Rating” can translate to dollars when you are selling your business.
If you are a seller, it does not make sense to be anonymous. Attend the CTW in December and the NAMA Show in May.
• Introduce yourself to the major suppliers
• Attend the industry receptions
• Go to as many education sessions as possible. It’s a great place to meet operators.
Think about it. Which company is more attractive to a buyer? One that lives in the shadows, or one that is proud to be high profile, is supportive of the industry and is passionate about convenience services?
Have your “ducks in order” – In the most successful deals, this is something we help with, often for one year prior to marketing an operator’s business for sale. After the valuation is completed, we ask – ‘Where do we want that valuation to be when we market the company and how do we elevate the business to that level over the next 12 months?’ We then establish key benchmarks to enhance the value of the company along the way. For example:
• We need to have the financials cleaned up by this date.
• We need to cut certain costs by this date.
• We need to raise prices at these locations by this date.
• We need to sell this many new accounts by this date.
The VBB Exit Advantage implements steps that will make abusiness as desirable as possible during the marketing process. It works – it is proven.
Say no to DIY – Being a “Do it yourself” seller just does not fly in today’s M&A market – not if you are seeking to be a premium acquisition.
Does choosing VBB Advisors as your sell side intermediary pay for itself? Ask Kyle Loughran, who is not your typical convenience services operator. He was attracted to the industry for many reasons, including micro markets and new technology. With a background in private equity, he had been involved in over 30 M&A deals before starting Legend Food Service. With all his experience in deal making, when it was time to sell the company, he turned to Mike Kelner and VBB Advisors.
“M&A is hard,” said Loughran. “It takes a lot of timeand focus. Mike is an expert in M&A and he will get you the best offer. Idon't think a full-time operator is going to have the bandwidth to focus on a deal the way Mike does. That extra band width on the front end of the deal translates to dollars,” he said. “For us, using Mike translated to multiple offers – the benefit was high six figures.”
Buyers come to me and my company,VBB Advisors, because they know that I serve sellers who have thoroughly andthoughtfully considered their exit strategy with my help. That is the type ofseller that you want to be – a seller who has their ducks in order, has takensteps to make their business as attractive as possible and a seller who valuestheir employees enough to make a deal that everyone will feel good about.
Take that critical first step. That is often the toughest one to take.
Orderour free 2024 Exit Strategy Planner. At the veryleast, it will provoke some thought, and this is a good time to think about your future.
Whatever your reasons are to sell your company - the timing, a sense of frustration, the desire to enjoy life or an interest in rewarding yourself for years of hard work – VBB Advisors can help you realize your goals.
I am Mike Kelner, the leading sell side intermediary in the convenience services industry. Let’s sit down and have a conversation. Use this appointment scheduler to set up a meeting with me.
Or – give me a call at 704-942-4621
