Something that Marsh Creek Advisors Founder and Managing Partner John Marsh says helps the businesses he represents have a successful process is going to market when they are ready, not because of some external factor or an event that forces their hand.
Finding the right buyer, running a sophisticated process and having a plan B that gives a company the option of walking away from deals that don't make sense, are important elements of a successful transaction. It's also important not to be desperate to sell the company. If there are issues, take it off the market, fix internal issues and go back in another year.
"That's the biggest thing that I see is controlling your destiny by running a process and doing it on your terms, not on the buyer’s terms," Marsh said at the inaugural Dallas Smart Business Dealmakers Conference.
Among the factors that make a sellable business are the financials that have gone through scrutiny, having a management team in place, diversification of revenue and reoccurrence of revenue. But something he says he spends a lot of time on is educating clients on their options and learning about their goals — do they want to continue to work in the business, or are they ready for what's next? That's a key aspect, he says, because that will determine who the buyer is. So, sellers should get their goals outlined and share that with the market.
Another important aspect is developing a competitive marketplace for the business.
"I talk to clients all the time who say, I know who the buyer is going to be," he says. "And they don't. They have gotten a couple emails. They've had a conversation. And these buyers are professional; they're good. They will make a business owner fall in love with the prospect."
Sellers also need to realize the work that goes into selling.
"You can't do your day job, keep the business going doing this and close the deal," Marsh says. "And 50 percent of deals fall through post LOI. Deals change, and you as a business owner can get beaten up. You will be exhausted, and you might be ready just to end the process and take a bad deal. So, you've got to build that team, you've got to work years in advance."
It's also important to spend time and resources developing strategic lists of potential buyers. That could lead to a targeted search, depending on the business and the goals, or a broad auction process. Either way, it's important to get in front of the right buyers and build competitive energy.
And in the event that a deal falls through, he emphasizes the importance of being able to move on to plan B, plan C, plan D, so that eventually a deal gets done. But that all has to be on the seller's timeline.
"It's got to be when you still have gas in the tank, not when something else is controlling your destiny or impacting your decision-making process," he says.
Additionally, he says many sellers don't know the market value of their business. And if a seller doesn't know that, then they can't be ready to sell because they don't know if it's enough money for them to retire.
"And it's items that are that simple that a lot of business owners neglect," Marsh says. "So, we talk about every 90 days, you need to ask yourself, are you growing? Or are you going to exit? And are you ready to exit?"
