Ed W. dropped his jaw when his financial advisor told him how much money he’d need to ensure the retirement life he and his wife had imagined for the past twenty years.
Then he brightened because he knew his accounting firm was solid. The sale of the firm would contribute the bulk of the money needed for the retirement fund.
Shock set in again when the M&A advisor he consulted estimated the price a qualified buyer would pay for the company. It was about half of what they needed.
Ed’s firm was viable. But was it “buy-able” at the price he wanted to sell it for?
Your Firm is Viable for You
A viable firm is one that’s generating cash for the owner. It is pretty well-managed, profits are steady, and there’s little to no debt. Assets and liabilities are within normal bounds, and the clientele is substantial.
But Is It “Buy-able” for A Qualified Buyer?
And yet—an outsider who’d consider buying the firm for a substantial sum may see some or all of these factors that reduce the price they are willing to pay for the firm:
- Client relationships with the owner, not with the firm.
- Long hours and little time off
- Limited or stale selection of offerings, rather than recent varied offerings all of which generate high profit margins; and none of which are more than a couple of years old.
- Not using technology to automate what can be automated and reserving the intellectual firepower of employees for delivering new value to clients.
- Modest annual rates of revenue growth and profit growth that are equal to or less than the norm.
- Lack of a roadmap for future growth (horizontal or vertical expansion for example)
- Limited efforts to de-risk the firm to ensure annual revenue and profit growth
What Does the Future Hold?
The hardest lesson for firm Owners to swallow is that just when you feel successful (and numbers back that up), you can’t rest on that success.
Why? Because today’s success is built on yesterday’s needs.
The growth firm works tirelessly to meet tomorrow’s needs and tomorrow’s clientele.
When you do that while owning the firm, potential buyers will see they can buy that stream of future value—and that’s what makes your company not just viable, but “buy-able.”
What are you doing to build your firm to meet tomorrow’s needs? How are you “poking the bear” of your success to see what pops up as opportunities for the future?
Not sure? Haven’t thought about it yet? Don’t know where to start? Would it be worth it to get a few answers? Simply text BUY to 703-801-0345 to schedule a complimentary call.