From 1988 to 2000 I bought and sold a lot of businesses usually doing around 5 deals per year, that’s over 50 deals with an average value of $10m per deal (a little sample of deals is posted here). However I probably handled over 200 deals but failed to secure an attractive enough price for the sellers or any offer at all. Because as a corporate finance advisor you can have all the skill in the world but if the company is not saleable its not saleable. During this period of my career I made notes of why businesses sell for top dollar, why some just get away by the skin of their teeth and why some fail to attract any reasonable offer at all. I interrogated colleagues why their deals failed. I discussed with my competitors why their deals failed. Thus I compiled an operational checklist to help change the odds – The Saleability Test.
This list isn’t just about selling your business but it’s about measuring Business Value. A public company is measured every day on its stock market, NASDAQ, London, Borse, Tokyo, Hong Kong wherever it is listed. Every day the share price stops moving and the Market Capitalization is there for everyone to see. That’s the value of that company at that moment. Of course there is no guarantee that any one company would which to acquire it at that price but it is a consistent measurement of shareholder value. A private company on the other hand has no such measurement. So for entrepreneurs the only point of measurement of value is when they sell out. And this is where the disappointment occurs. Out of a total population of 27.3m private companies in the US approximately 5900 sold out in 2011 for $10m. Of course not many of the 27.3m tried to sell their business. However the statistics give you a feel of the rarity of selling out for a retirement type sum. For every $1Bn Instagram sell out there are millions of companies who will never make it even if they want to.
So by creating the Saleability Test I felt I could give entrepreneurs some detailed insight on “how a buyer thinks” not just to create a business to sell but to create a business that was increasing in value and thus would, one day, give the owner the option to sell.
The second half of my career over the last 12 years I’ve dedicated to running businesses according to the 15 Key Drivers in the Saleability Test. Using this experience I’d like to share key Playbooks that move the dial. Detailed strategic and operational advice that if executed will create higher scores in the long run. Take the Test. Score your business and enjoy my blog posts over the next few weeks as I explain the Playbooks that help you improve your score and create a more valuable, enjoyable and predictable business.
