One of the significant services that Generational Equity, part of the Generational Group, provides to its clients is the ability to help the business owner look at his/her business through the lenses of potential buyers. For many this is a hard, painful concept to fathom because, as one client told me a few years ago, “No one likes to be told their baby is ugly and needs improvements.”
But just like your doctor, we tell you the tough news so you can then analyze your company as a buyer would and anticipate, create, and implement strategies to address their possible concerns. The great news is that thinking like a buyer and improving your business does not have to be rocket science and in many cases strategies do not have to be fully implemented in order to address buyers’ concerns. For lots of folks, just being on the path is what matters to a buyer because most realize that the final outcome, the goal, is an ongoing path that continues for perpetuity.
How do you begin to think like a buyer and objectively review your business? The first step is to realize one basic fact: Professional buyers of businesses (the kind of buyers you want to attract by the way) are wary of risk!
Now of course the acquisition of any privately held company will carry with it a certain element of risk and unknowns. By the very nature of the way our economy operates, the secrecy and confidentiality that encompass privately held entities is both a strength and a weakness. The positive is that prying eyes can’t see the inner workings of what makes your company unique; the negative is that you have to then convince a skeptical buyer that your business is indeed successful and explain why.
Having said that, as we have discussed before, buyers are most interested in one primary area: the stability of your company’s future earnings.
The more you can do to give a buyer confidence in this key area, the better off you will be when sitting down with him/her during negotiations and due diligence. This is a vital concept because far too often entrepreneurs focus on top line, revenue growth, at the expense of profit margins, and this is key area that buyers examine quite closely.
Important Profitability Tests
For example, one of the first questions we discuss with our clients is their profit margins by product line. We do this because we need to determine if the business is buying growth with key customers at the expense of margins. To many business owners, this analysis is eye-opening because often they learn that the key client they have been working with for years and generating revenue growth from has been maintained by sacrificing the bottom line.
This is just one example of the type of analysis a buyer will do on your earnings because, again, they need to ensure stability of income going forward.
Another example: How many of you compare your profit margins to industry norms? This is an analysis that most professional buyers will do since they have access to research tools that allow them to make this comparison. Again this is a key part of the standard business valuation that Generational Equity does on all of its clients becauseindustry ratio comparison can be indicative of quality of earnings.
These are just two of the tests professional buyers will use when looking at your future earnings strength. Time and space do not allow me to fully explore all the others. If you want to learn more, I suggest attending a Generational Equity M&A seminar. These are highly educational and are designed to help you start to review and analyze your company as a buyer would. If you are planning to exit sometime in the next five years, I recommend attending one soon. Carl Doerksen is the Director of Corporate Development at Generational Equity.
it all started with a conference.
start your story today,
speak directly with one of our senior advisors +1-972-232-1121
The information we learn from customers helps us personalize and continually improve your experience. Here are the types of information we gather.
We receive and store any information you enter on our Web site or give us in any other way. We do not sell or rent your personal information to others without your consent. We use the information we collect only for the purposes sending promotional information, enhancing the operation of our site, serving advertisements, for statistical purposes and to administer our systems. We DO NOT use third parties to provide customer service, to serve site content, to serve the advertisements you see on our site, to conduct surveys, to help administer promotional emails, or to administer drawings or contests, but reserve the right to do so in the future without advance notice.
By submitting my name electronically and clicking the “submit” button, I understand that I am providing Generational Group, Inc., Generational Equity, LLC, Generational Capital Markets, LLC, DealForce LLC, their affiliates, representatives, contractors, etc. (“Generational Group”) my telephone number, which may include a number that is wireless and/or a number that is on a national, state, or other Do Not Call registry or list. I hereby consent and agree to receive telephone calls including any autodialed and/or pre-recorded telemarketing calls and/or text messages (telemarketing) from or on behalf of Generational Group at the telephone number provided. I further consent and agree that telephone calls may be made using automated technology such as an automatic telephone dialing system, artificial or prerecorded voice, or SMS text messaging. Consent is not a condition of purchase. I further warrant and represent that any telephone number provided is not on any state or national Do Not Call Registry and that by agreeing to these terms and conditions that if any number provided is on any such registry, I hereby consent and agree to receive telemarking calls and/or communications including any phone calls, text messages, URLs, links, emails, etc. to the telephone number(s) and/or any e-mail addresses provided. I understand that by entering my name in the electronic form provided, that I am signing my name as equally as if it was my handwritten signature and that it is my intent to provide an “electronic signature” as that term is defined in state and federal law, as well as industry practices for e-commerce.
For reasons such as improving personalization of our service, we might receive information about you from other sources and add it to our account information.
Generational Group may license the use of its intellectual property including but not limited to its name, likeness, and logo for the use of affiliated offices. Such affiliated offices may not be owned, controlled, managed, supervised or staffed by employees, officers, or agents of Generational Group. Affiliated offices may be independently owned and operated. For more information about a particular office, please contact Generational Group at its office in Dallas, Texas.
This page may contain other proprietary notices and copyright information, the terms of which must be observed and followed.
Information on this web site may contain technical inaccuracies or typographical errors. Information may be changed or updated without notice. Generational Group may also make improvements and/or changes in the products and/or the programs described in this information at any time without notice.
Generational Group does not want to receive confidential or proprietary information from you through our web site. Please note that any information or material sent to Generational Group will be deemed NOT to be confidential. By sending Generational Group any information or material, you grant Generational Group an unrestricted, irrevocable license to use, reproduce, display, perform, modify, transmit and distribute those materials or information, and you also agree that Generational Group is free to use any ideas, concepts, know-how or techniques that you send us for any purpose.
Our computer system protects personal information using advanced firewall technology.
Information Generational Group publishes on the World Wide Web may contain references or cross references to other products, programs and services that are not announced or available in your country. Such references do not imply that Generational Group intends to announce such products, programs or services in your country. Consult a Generational Group representative for information regarding the products, programs and services which may be available to you.
Generational Group makes no representations whatsoever about any other web site which you may access through this one. When you access a non-Generational Group web site, please understand that it is independent from Generational Group, and that Generational Group has no control over the content on that web site. In addition, a link to a non-Generational Group web site does not mean that Generational Group endorses or accepts any responsibility for the content, or the use, of such web site. It is up to you to take precautions to ensure that whatever you select for your use is free of such items as viruses, worms, Trojan horses and other items of a destructive nature.
IN NO EVENT WILL Generational Group BE LIABLE TO ANY PARTY OR ANY DIRECT, INDIRECT, SPECIAL OR OTHER CONSEQUENTIAL DAMAGES FOR ANY USE OF THIS WEBSITE, OR ON ANY OTHER HYPERLINKED WEBSITE, INCLUDING, WITHOUT LIMITATION, ANY LOST PROFITS, BUSINESS INTERRUPTION, LOSS OF PROGRAMS OR OTHER DATA ON YOUR INFORMATION HANDLING SYSTEM OR OTHERWISE, EVEN IF WE ARE EXPRESSLY ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
Furthermore, all information contained within this website is the property of Generational Group.
Success, you have been added to our list.