The Smith Report - Operational Playbooks

Building Businesses Buyers Love – The Saleability Test

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Building Businesses Buyers Love – The Saleability Test

Here is the big picture. In the US there are 27.3m enterprises of which 634,000 employ 20 people or more. 5568 or 0.9% sold out last year for $10m or more.
Source, US Census Data and public M&A tables.
Here is a test to help you work out if you are saleable at a premium valuation.

I’ve used this test as a predictor of success of “selling out” at attractive prices. Those companies scoring 60 or above were almost always sold at a premium valuation.
Give yourself a maximum score of 5 if you strongly agree with the assertion and zero if you totally disagree.

 

Conclusions

A score of 60 or above implies you own a highly saleable business.
A score below 60 but above 46 implies a quality business with a few grooming issues worth addressing.
A score below 46 but above 30 implies a good business but which contains problems that need to be addressed to ensure the maximum proceeds are realized from a sale.
A score of 30 or below implies a business that needs to address some fundamental issues to ensure that shareholder value is not eroded in the short to medium term.

Addressing some of these issues can take years to fix but the prize is a more predictable, successful business even if you hang on to it!

The Portfolio Partnership works with CEOs to fix these issues, working in the business, following signed off 100 day plans to get stuff done. Working on the right agenda delivers a more predictable, fun and successful business.
Reach out for a free chat using our “contact” page.

What do you think makes a business saleable?

 

Related blog post – Checklist for Maximizing Post Tax Exit Proceeds

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About the Author

Ian founded The Portfolio Partnership (TPP) in 2010. TPP is an operational consultancy focused on scaling private businesses safely. He believes his resume of building 4 previous businesses from publishing, investment banking to software in Europe and the States gives him a unique set of skills and a sense of humor. He remains a competitive masters track & field athlete and in 2012 was ranked #2 indoors in the world for his age at 400m.

Discussion

  1. Paul Cronin  August 25, 2011

    Good stuff Ian. I like the simplicity of a scorecard. Someday, I expect my business to be in a position to sell – we have a long way to go…

    (reply)
  2. Ian Smith  August 25, 2011

    We all need to focus on the right stuff and a scorecard definitely helps.

    (reply)

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