We’re all a little horrified with ratings right now (particularly when the pronoun “she” is involved). But in reality, when you are ready to sell your business, how buyers rate “The Princess” is all that matters!
For the fifth and final podcast in our series about getting a business ready for sale, hosts Evelyn Ashley and John Monahon caught up with George Shea and Manan Shah of Focus Investment Bank.
“One thing that potential sellers ought to keep in mind is that when their business looks attractive to them, it looks attractive to the buyers as well,” says Shah. “When business owners look at a very strong growth in the pipeline and the market conditions are right, they should start thinking about exit options. If you read some about some of the most successful exits, most of those entrepreneurs would say that they sold too soon, and that it was the reason behind their success.”
Sellers would be wise to look beyond the walls of their organizations for cues on timing, too.
“From the buyer’s perspective, what we're seeing in the market place is a real premium on recurring revenue,” says Shea. “That translates really to two business models that we currently serve: one is software as a service (SAS), and the second is managed services, or outsourcing.”
One of the biggest value drivers in a transaction is scarcity, and the market can dictate when a seller is going to get the best price. The first offer on the table is rarely the best one, and entering the market at the right time and with a competitive mindset can drastically affect the bottom line.
“Our strong belief is that the way to get premium value for any company is to have multiple offers where we can leverage one offer against the other to get the best possible value for our clients,” says Shea. “If you're talking about one strategic buyer that's made an offer, which may be a decent offer, you're at risk. Essentially, if you've got no backup and that horse goes off the trail, so do you.”
Stream the whole conversation below as Shea and Shah discuss the current selling climate, typical exit process, and the importance of a strong management team. For the full series on selling your business and other episodes of the podcast, subscribe to In Process: Conversations about Business in the 21st Century on iTunes.