In today’s marketplace, if you’re not growing, you’re going backwards. According to a new Ernst & Young report, a whopping 69 percent of U.S. CEOs plan to grow through acquisition this year. Driving the trend are increased confidence in economic growth and the availability of capital.
There’s a woman in my neighborhood, a busy mom, who had a stroke last year. The sudden, life-threatening illness came out of the blue for this young, healthy woman.
You made it. You’ve paid back your business loans and can run your company with just a line of credit. You’re profitable. You’re comfortable. And you don’t have to pay such rigorous attention to things like accounts receivable turnover and your particular accounting methods.
Warren Buffet once said, “It’s far better to buy a wonderful company at a fair price, than a fair company at a wonderful price.” I certainly think he’s right.
Working with our buy-side division, of course we understand that everyone wants to get a great deal. They want to find that perfect company and get it at a four-multiple when the market is running closer to six. We’ve seen clients walk away from perfect deals that hit all of their requirements, only because they wanted to buy below market.
As an owner, one way to maximize value in your business is to demonstrate that you’re not the smartest person in the room. In an ideal state, you work yourself out of a job, moving on to an advisory role while your management team runs day-to-day operations.
With that said, it’s equally important that your goals and values are in sync with your managers’. When selling a business, you want to show buyers a positive work culture in which team members work well together and make each other better.
What’s the value of a customer when it’s time to sell your business? The short answer: It depends.
I don’t just tell people to use a specialist and then go home and try to do things on my own. I just sold my house, and because of the licensing I need to sell a business, I had the proper credentials to sell it myself. I already have all the forms and a good relationship with an attorney who would advise me.
These are all factors a business owner can typically control within a relatively short time frame, in as little as two to three years. That said, other key business elements such as industry and competition also impact the sale price, but business owners will need a much longer-term strategy in order to effect change in these areas.
It’s about that time when I like to make some forecasts for the year ahead. I am happy to report that last year’s predictions were pretty much on target and the M&A marketplace continued to run strong throughout the year.
One thing I did not predict, however, was a Donald Trump presidency. We generally expect elections to create uncertainty, but the markets have responded in a positive manner. I believe the M&A marketplace will follow in kind with a productive and active year ahead.
Here’s what else I see coming.
By Scott Bushkie – CBI, M&A Advisor
Here’s hoping all your holiday gifts were well chosen and gratefully received. If you’re anything like me, you bought all your presents on Christmas Eve morning. There’s something about that final shopping day that puts me in the spirit.
Of course, that kind of last minute shopping might work for gifts, but not when it comes to buying a business. As you think about business growth, sit down with your team and figure out if acquisition could be the right strategy.
Here’s why several of our active buyers are searching the market right now.