Because there is risk…

There is risk, as they see it, that returns will either stagnate, or otherwise decline or disappear…a higher risk. as they see it, than if profits were substantial and growing. Further there is likely to be investment required to be able to make it the best it can be.

If a contrarian buyer is all you can attract to your business you have a problem…less competitive tension around the sale of your business, and a higher likelihood of you accepting a lower price than you would like to.

But fortunately for you there are LESS contrarian buyers than other buyers. Your job is to make your business too expensive to contrarian buyers (and justifiably so) and make your business more attractive to mainstream buyers…but even then you may not appreciate how today’s mainstream buyer thinks …. more on this later.

No matter how powerful your vision, or appealing your product, if you are unable to present accurately and effectively the current position of your company, you can say goodbye to the funds from investors.

Here are a few tips on the financials…

1) If you, the business owner, are not comfortable with the numbers, then you need to recruit someone who is.

2) Even with a good numbers guy, the numbers need to be presented effectively, clearly, concisely, and without “noise” (=too much detail) ie summarise, as well as have the detail handy just in case required.

3) It goes without saying, your proposition must make lots of money. For example – venture capitalists require at least a compound 30% return but depending on the risk may go up to 100% or more.

4) Have an effective framework in place to regularly and accurately demonstrate to your stakeholders ( your investors, board, employees, banks etc) that you are on top of your numbers.

Remember attracting an investor is all about providing an expectation of a return for a given set of risks. If you can’t demonstrate how you are going to manage the return (that includes producing it)  then you simply wont attract an investor.

In other words, you know where you are now and know where you need to go. All you have to do is fill in the gap – create value and reduce risk – and by dividing up your project plan in this way you will cut through a lot of noise in determining what you should be doing and what truly is not adding to the valuation equation.

One way that will turn the approach to valuing your business on its head is to become a “strategic” catch for a larger organisation. The new paradigm for start ups and early stage businesses in the digital space is exactly this – look no further than  Google, Yahoo, MSFT to see this happening on a regular basis. They are paying significant sums to tiny organisations – some that haven’t made a penny – that provide massive strategic value to their enterprises beyond the financial returns from the business itself. And these organisations have money to burn ie where capital may have been reserved for R&D in years gone by, they have reduced their R&D departments in lieu of finding lower risk propositions in the market. ie ones that have been through proof of concept already on someone else’s account..

But your whole business does not need to be a strategic play for an incoming buyer, parts of it would be fine to create that extra level of interest in what you have on offer, and potentially the hook to explore deeper into your business. Strong financial returns, coupled with sound strategic assets make an attractive equation for larger organisations. What in your business can you provide to larger business with scale or a strategic need that will be worth alot more to them than simply a run of the mill multiple of 2 -3 x EBITDA.

- There will be an increase in the number of businesses coming up for sale.

- Broadly speaking there will be a similar number of buyers

- That is, there will be an over-supply of businesses for sale.

Basic economics would alert us that this will have a downward impact on prices.

This is all up, not good if you do nothing. But there is plenty you can do to differentiate yourselves from those that choose not to do anything (and even against those that do) and that is what we do here at Scotia Macleod. Build value, reduce risk and then go find the right buyer…..all perfectly reasonable logic.

But what if your business is … well your life and letting go of it will transform your life and not necessarily in a way that you are comfortable with right now? It is too hard to think about – or perhaps it is more of a case, you can’t stop thinking about it because you don’t know the answer. In this case, no matter how much advice you are offered, if you are not happy what the result might be if you acted upon that advice, not much will happen. This is why we think that defining your life after the sale before you embark on the sale process, is critical to the success of selling your business. An inspiring “after sale life” will drive you through the sale process in the same way as you drove yourself to build the business in the first place. Take a look at our white paper “Life after Sale” available for download for more information.

Stump the Strategist keeps getting better and better. Don’t just take our word for it, watch the below to see the testimonials.

This is our seventh event and there have been many difficult questions thrown our way, but we have conquered them all thus far! Come and watch us defeat the problems one by one.
If you have a marketing problem that has you stumped, bring it along to our next Stump the Strategist event and we will help de-stump that problem on the spot!

We’ve got the big guns for you. The Step Change Panel:

Ashton Bishop – Currently a Lead Communications Strategist for Toyota Australia
Simon Rutherford – The most awarded Media Strategist in the country
Jeff Cooper – Named in 2010 as one of the Top Marketers under 30
Ken Macleod – The founder of Scotia Macleod, an inspiring finance and operational professional

• What: Step Change “Stump the Strategist Evening” – bring your biggest marketing challenge.
• When: Thursday 24th March. 6:15pm for social drinks with a 6:45pm start. This night concludes at 8:00pm.
• Where: Level 1, 435a – 437 Kent Street, Sydney.
• Cost: Nothing – this event is entirely on us.
• What to bring: A marketing challenge or question that you’d be happy to discuss in an open forum. You are also welcome to bring a guest.
• Provided: Nibblies and drinks

• RSVP: Essential – book as soon as possible via this link.

Free parking
As we love to help you solve problems we have gone that extra step to make your visit even easier. Parking (next door) will be re-funded: Entrance at 431 Kent St or 204 Sussex St.

Some drinks and food will be supplied whilst we problem solve on the spot.

No business can afford NOT to have an online store. Growth in consumption globally is coming from digital and online. If you are in a market that is experiencing significant growth through digital delivery of your products and services, then if you are not on the curve, it might just be too late. Kobo came too late. I wonder how they will re-invent themselves

Out of all the well wishes of for the New Year I could offer, this from X Coke CEO Bryan Dyson does it for me. Wishing you a Happy and Prosperous 2011.

Imagine life as a game in which you are juggling some five balls in the air.
They are Work, Family, Health and Spirit and you’re keeping all of these in the air. You will soon understand that work is a rubber ball. If you drop it, it will bounce back. But the other four Balls – Family, Health, Friends and Spirit – are made of glass. If you drop one of these they will be irrevocably scuffed, marked, nicked, damaged or even shattered. They will never be the same. You must understand that and strive for it. Work efficiently during office hours and leave on time. Give the required time to your family, friends & have proper rest. Value has a value only if it’s value is valued.