Building for exit (a.k.a. enterprise) value optimization is a great way to build a highly valuable business regardless of your interest in selling it or not someday.
Here is a relatively comprehensive list of areas to address in priority order to optimize exit value and build a healthy and thriving company.
Things that drive exit value:
- Reduce the risk for the buyer
- The entrepreneur/CEO/Owner is redundant in the business
- Powerful, healthy Management Team and Bench for key positions
- Revenue predictability and quality over several years…consistent growth in Revenue, Profit and Cash
- Show significant growth potential in current, adjacent and/or new markets
- Healthy culture, high engagement organization
- “Rembrandts in the attic” – Value beyond the financial returns – Value over discounted cash value
- Bring multiple buyers to the table
- Documented Systems
- Customer diversification
- Have no one customer that is more than 10% of total revenue/profit
- Protect your IP (Intellectual Property)
- Dashboards and KPI (Key Performance Indicator) visibility
- Make the books squeaky clean – taxes, receivables, short and long-term debt, etc.
- Clean records with good data
- Clean up facilities, if applicable
- HR compliance
- Tighten up ALL Agreements
- Solid employee agreements,
- Solid vendor, supplier, technology, customer, agreements,
- Partner legal agreement,
- Real Estate agreements, etc.
- Address any pending or active lawsuits
How have you built your company’s value?
- Dave Baney is the founder and CEO of 55 Questions, LLC. “ We work with successful top executives with a driving ambition to crush their competition.” We help CEOs and Entrepreneurs improve alignment, communication and accountability throughout their organization. 55Questions.com
- Follow Dave on twitter https://twitter.com/55Questions