Staging A Business For Sale
5 Steps to Maximize Enterprise Value
By Robert S. Kheir, Associate
Oakville, Ontario Office, Corporate Finance Associates
Prime time television is littered with design shows, from staging a home for sale to renovating a dream kitchen. Newspaper snow dedicate entire sections to Real estate and Design. All of
this media attention caters to North America's fascination with maximizing the value of an asset that represents a substantial portion of their personal net worth: Their home.
For some North Americans who are business owners, their enterprise is their single largest asset. Every day they get up to go to work, they put a substantial portion of their personal
net worth on the line. If that's the case, why is so little written about staging a company for sale?
The theory of crosspollination states that if you take the knowledge from one discipline and apply it to another, there is the potential for enrichment. So we've decided to take the
bounty of information on staging a home for sale and applying it to staging a company for sale. In other words the world of "Crate and Barrel" meets the world of "Mergers and
1. Curb appeal
The first thing a home buyer always sees is the outside of the home. The first thing a business buyer asks to see are financial statements. Never forget about those first impressions.
A business' statements speak volumes about the organization, much like a front yard. If a business had a hiccup one year, an owner will need to ensure there is valid commentary behind
it. Also, financial ratios should be up to industry standards, as everything from inventory turns to gross margins will be analyzed. Lastly, every business should have defensible
forecasts prior to sale and remember those hockey stick forecasts rarely stand-up to scrutiny.
As any realtor named Tom, Dick or Harry will tell you, a potential homebuyer visualizes themselves living in the home, as they stroll through the rooms. If you've plastered your
honeymoon pics all over the house, it'll be a tough sell. The same is true in a business sale. An owner who has a rubber stamp on every facet of the business marginalizes the operation
in the buyer's eyes. "Owners who run their ships like it will sink without them, risk having their valuations sink faster than an anchor" says a Principal at a leading California based
Private Equity Group. Most buyers ask the question, "Will the business walk, if the owner walks?" They are buying the business not the owner. The more the business is delegated to
decision-making management, the more it reassures the buyers that the owner has built a system that works and is scaleable.
3. Neutral Tones
Neutral tones in a home appeal to a wider array of buyers. Serving a wide market also serves this purpose for a business - it's called customer diversification. For instance, having
General Motors represent 20% or more of revenues, when the market for automobiles is stagnant and the flood of imports is evaporating market share faster than the arctic glaciers is a
red-flag for a potential buyer. It's akin to painting an entire house bright red. In both instances, neither asset is screaming buy me.
Apparently, home buyers love to peek into closets and pantries. In selling a business, any dirty laundry shoved into closets will be found during the due diligence process. The more
candid and transparent the information the smoother the selling process. If a business has a pending litigation, it is important to bring it out in the open and explain it to the
prospective buyers. Good buyers understand that these types of things are costs of doing business – Just like cleaning is a cost of owning a home.
5. Add Warmth
Home stagers will often tell a homeowner to add fresh flowers to warm up the room - "it's the little things that matter" they say. Warmth in a business comes from employees. A crabby
receptionist to disgruntled employees huddled around the water cooler, they stand out like sore thumbs and savvy buyers pick up on these things. You can also bet potential buyers will
be chatting to employees, whether directly or indirectly. There is an old adage that says "if you take care of your employees, they'll take care of your business" – This speaks volumes
when selling a business.
The Investment Bankers can also teach a thing or two to the Realtors, but for right now we've taken a page out of their playbook.
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