So, you want to sell your company or raise some capital? My first recommendation is: be prepared. If you don’t put in the groundwork before you hit the market, you could be selling yourself, and your business, very short. You may have good marketing with a flashy pitch deck (that’s jargon for a business plan presentation). You may have perfectly structured financials (although these are rarer than you’d think). But, once you’ve got an interested party, they’re going to do more than just kick the tyres and look over the service book. They are probably going to call on a pro mechanic for a detailed inspection and he or she will peer under the bonnet, check the oil and analyse every other moving or electronic part. In business, this is known as ‘due diligence’, and I’ll come back to that later. First, you may want to get up to speed with my previous blog, Why valuing your business is like looking at a mosaic. This will help you understand why your business is a complex collage of valuable and less- valuable elements that must be considered individually before you place a total value on your company. After that, we’re in a position to make sure that fancy pitch deck and your perfect financials aren’t at odds with each other. So, if you think your marketing and financials are aligned, and quickly, simply and clearly show the most valuable elements of your business, I’d challenge you to come and test them on me. I will put myself into the shoes of your discerning buyer – the buyer who either gets it straight away, or walks away. Remember your potential buyer or investor wants to make money from your business. And they, no doubt, want to make more than you ever did. So, you need to show them how they can.
A pitch deck isn’t one-size-fits-all
Every buyer is looking for something different. So, research the market and your potential buyer, if possible. What will excite them? Where can your business go? What do audiences and clients want? Here are some considerations: · Does your buyer have the reach or scale to take your product into markets you couldn’t. If that’s the case, make it clear what’s possible. · Are there developments planned that you haven’t been able to finance? Include them to show the business’s potential. · Could elements of your business enhance elements of their business, making their acquisition of it even more valuable for them? Spell it out for them.
Ready, set…financials!
So, you have hooked a potential buyer or investor with your pitch. Now their due diligence begins. And they are going to send you a long list of information they want. The trick here is to have it 95% ready to go. That 95% makes up the standard financial information that is commonly requested. The other 5% is critical though. It’s the part you need to tailor to show them your added value, to cover what they may have experienced in past deals, or mitigate a risk that has been highlighted or exposed. Have your 95% filed electronically, if possible. Here are some examples of what you need at a moment’s notice: · Past 3-5 years’ financials and tax returns · Employee information · Client revenue by product / services line for the past few years · Client contracts · Partner contracts · Leases and any long-term commitments · Board meeting minutes · ASIC records. That’s all relatively straight forward and IFL Ventures can help you get this prepared. It’s basically admin, and you have all these signed contracts and files somewhere, right??!!
Time for talking
But what about some of the other stuff you need to be ready for? During due diligence prospective buyers or investors may also become more like private investigators. They will probably want to talk to many people directly involved in your business including: · Key staff (What is the culture like? Ethics?) · Clients (They will choose them and probably won’t want you to listen in.) · Business partners (How have your dealings been? Is the business all it seems?)
Transparency seals the deal
Let’s say you’ve wowed the interested party with an amazing pitch deck and tailored perfect financials, but you aren’t prepared for the rest of the due diligence – then it’s likely you may have blown it. Investors or buyers will have come away concerned or worried about the realities of your business and will either drive down the price, or run away completely! That’s why having a good corporate advisor, who has your best interests at heart, can make sure this doesn’t happen, by guiding you every step of the way. For example, IFL Ventures can help you make sure you understand the key areas of value in your business. We can help you win over your targets quickly and effectively. We can make sure they remain confident in your business’s worth and we can maintain the highest price throughout the process. We can also handle all the negations on your behalf. Ready for the adventure. So, make sure your funky pitch deck is backed up by water-tight financials and you’re ready for other aspects of the due diligence process. And carefully consider bringing in expert support too. Because while this business adventure can be good, being prepared can make it great!