|Commentary -Season’s Greetings from The Principium Group
At this time of the year, we pause to thank our clients, colleagues and friends. The friends we have made and the relationships we’ve developed across the country mean a great deal to us and we are truly thankful.
This is the time of year when many of us are reevaluating and planning for the coming year. For some of you, that will include considering an acquisition. For others, it will mean considering the sale of your business. Many more will include long-term exit strategy planning in their thoughts. If any of these are on your agenda, we would welcome the opportunity to speak with you.
Call me direct at 901-351-1510
|Increasing Your Chances of Getting an Offer
The Principium Group has partnered with The Sellability Score for over a year now. Many clients and industry friends have taken the 13-minute Sellability Score quiz and received their Sellability Score and a detailed report.
The Sellability Score is a cloud-based software tool that allows a business owner to assess the “sellability” of their company. It was developed by John Warrillow, author of the best-selling business book, Built to Sell: Creating a Business That Can Thrive Without You. The researchers at The Sellability Score analyze the data from users to understand trends in the business market, with a special focus on the liquidity of privately held businesses.
Researchers from the Sellability Score recently focused on the relationship between key performance indicators of businesses using The Sellability Score and isolated those that had received an offer to buy their company in the past 12 months. They identified 10 factors that increase the likelihood you will receive an offer to buy your business.
You are almost twice as likely to get an offer if your business can survive the “hit by a bus” test. Sixteen percent of Sellability Score users who say their business can run without them have received an offer to buy their company in the last year, compared to 9% who could not pass the “hit by a bus# test. In other words, you’re almost twice as likely to get an offer if your business can thrive without you.
You’re twice as likely to get an offer if you could easily replace your top sales person. Eighteen percent of Sellability Score users who say it would be easy or fairly easy for them to replace their most important sales or marketing person have received an offer to buy their company in the last year, compared to 9% who say it would be impossible to replace their top person. In other words, if you’re completely unprepared to replace your top sales person, you’re half as likely to get an offer.
If you, as the owner, are doing all of the selling, you’re less than half as likely to get an offer. Sixteen percent of Sellability Score users who say they are responsible for less than 75% of sales have received an offer to buy their company in the last year, compared to 6% who say they are responsible for more than 75% of the company’s revenue. In other words, if you’re doing most of the selling yourself, you’re less than half as likely to get an offer.
Companies that could replace their top product / service design & delivery person almost twice as likely to get an offer. Fifteen percent of Sellability Score users who say they could replace their top product/service design & delivery person have received an offer to buy their company in the last year, compared to 8% who say it would be impossible to replace their top design & delivery person.
Size matters. Larger businesses are twice as likely to receive an offer as very small ones.Twenty percent of larger company Sellability Score users have received an offer to buy their company in the last year, compared to 9% of the smallest Sellability Score users. Mid-size companies are one and a half times as likely to get an offer as smaller companies.
Companies that can replace their key supplier(s) are almost twice as likely to get an offer. Fifteen percent of Sellability Score users who say they could replace their key supplier(s) have received an offer to buy their company in the last year, while only 8% of those who couldn’t have received an offer. In other words, if you are confident you could replace your top supplier(s), you will be more than twice as likely to receive an offer.
Younger owners getting offers at twice the rate of their parents – buyers keen to acquire young growth companies. Twenty-six percent of Sellability Score users who are young business owners (age 32 and below) have received an offer to buy their business in the last year, whereas only 12 % of older owners received an offer.
Companies with a management team (as opposed to a sole manager) are getting offers at almost twice the rate. Sixteen percent of Sellability Score users whose companies have a management team have received an offer for their business over the last year, compared to 9% of those companies that have a sole manager. This means you are almost twice as likely to get an offer if you have some form of management team.
Companies with a strong social media following are almost twice as likely to get an offer. Twenty-three percent of Sellability Score users whose companies have at least 10,000 “followers” (e.g., e-mail “opt ins,” Facebook “Fans,” Twitter “Followers,” etc.) have received an offer for their business in the last year, compared to 13 % of companies that do not have a large contingent of followers. This indicates that you are almost twice as likely to be of interest to an acquirer if you build up your connections, fans and followers.
Companies with more recurring revenue are more likely to get an offer. Fourteen percent of Sellability Score users whose companies have “recurring revenue” that makes up more than 25 % of their total revenue have received an offer for their business over the last year, compared to 9 % whose recurring revenue was less than 25%. This indicates that your company is much more attractive to buyers if you have created a recurring revenue stream.
We will be conducting a special webinar focusing on these and other lessons from The Sellability Score and their applicability within the green industry on January 17, 2013 at 1:00 PM Eastern Standard Time. To receive an invitation to this webinar, just take The Sellability Score quiz. Click here to get your Sellability Score and an invitation to the webinar. Clients and friends who have already received a Sellability Score will receive their invitation by email.
|Preparing to Sell Your Business
New E-Book Available for Download
Preparing to Sell Your Business – A Guide for Green Industry Business Owners, a new e-book by Ron Edmonds of The Principium Group has just been published. The 30 page e-book explores both preparing yourself (as a business owner) to sell your business and preparing your business to be sold.
Preparing to Sell Your Business is available for download from The Principium Group. Click here to download it.
|Do You Understand the Value of Your Business?
Consider a Market Value Assessment
Understanding the Value of Your Business is an important step in the Exit Planning Process. Most business owners do not have a clear idea of the value of their business or understand the important factors that drive that value. Understanding the value of your business will help you plan for the future and will also allow you as a business owner to take constructive steps to improve that value over time.
The Prinicpium Group offers a cost-effective approach we call the Market Value Assessment. The Market Value Assessment provides a valuation for your business based on established methods and industry conditions for planning purposes. It also will specifically identify importqant factoprs that affect the value of your particular business.
If you are interested in learning more, please click here, email us or call Ron Edmonds at 901-351-1510.
Planning for Profits in 2013
with Jeffrey Scott
Friday, December 21, 2012 11:00 AM EST (10:00 CST, 9:00 MST, 8:00 PST)
Learn from leading landscape firms and best practices developed by Jeffrey Scott
Learn How The Best Operate!
Immediately Improve Profitability and Strengthen Your Business
Plus, you will learn 4 key steps to growing a successful business. You will identify which steps you are weak on and where you need to improve.
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|Books by Ron Edmonds
Green Exit: Exit Planning for Lawn and Landscape Business Owners
Charting a Course: Acquisition Strategy in the Green Industry
How to Sell Your Green Business
Also available for Kindle, Nook and iBooks.
Also available from Amazon.com and other online retailers.