$1 Billion Missed Opportunity
Operational Excellence For Exits
Acquisition Support Services
Acquirers Need a Playbook
Valuation Gaps & How To Close Them
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978-395-1155
The $1 billion plus missed opportunity. Standing back and comparing the number of enterprises in the US compared with the number of decent sized exits say worth > $10m in a year reveals a shocking reality. Exits are mainly a failure. They are a graveyard of failed dreams. Facts; there are 36 million US enterprises. 6.3 million run a payroll. 6.2 million employ < 100 people.
How many exits in a year achieve >$10m? Around 8000 to 10000.
Exits on the whole are a disaster. Years of hard work and dedication are not not being crystallized in cash wealth. Of course not everyone wants to exit but surely everyone wants to create an increasingly valuable business?
But they are not. Too many owners are building unsaleable businesses. Too many owners are developing value leakages every year. Here are the main culprits.
1️⃣ POSITIONING – no differentiation. Mostly me too products and services. Vanilla. Your unique space in the universe is badly defined. Storytelling sucks. Your website mumbles in jargon filled nonsense.
2️⃣ DEPENDENCY – the business is heavily dependent on the owner(s) for winning work, writing code, building products, designing products, building the technology. Fill in your own dependency. In other words the risk to a buyer is huge. The business is heavily dependent on legacy products. Cash cows dominate the P&L. R&D investment has been slow. You are behind the competition. The business is heavily dependent on a few blue chip customers. For example 40% of last’s years revenue came from 5 clients. Or 60% of Gross Margin came from 2 products out of 20 products
3️⃣ GROWTH – Sustainable profits are a train wreck. No consistency. One year you are making $2m, the next $150k. This makes it very difficult for a buyer to assess the ongoing profitability. Barriers to entry are weak. IP has not been filed. Your competitive moat is weak. The growth trajectory is inconsistent, especially revenue. But even if the business is growing every year, the rate of growth is declining. The original market you entered has declined. Think ship building, Lotus Notes, logistics software, print media, DVDs! You appear to lack a recurring revenue stream.
4️⃣ PEOPLE – There is a limited second tier management structure. Career development has not happened. Staff morale is weak when surveyed.
5️⃣ GOVERNANCE – IT systems are not aligned to the company’s objectives. Key metrics are not measured eg product profitability over time, sales forecasting credibility by sales person, liquidity ratios on the balance sheet, productivity utilization of you labor force. Unresolved litigation represents a contingent liability not on your balance sheet. And finally but key, your processes lack rigor and you have not been documented in playbooks.
The solution is innovative but simple.
LOOK AT YOUR BUSINESS THROUGH THE LENS OF A BUYER. Identify the value leakage. Use our Saleability Test™ or let us conduct our Strategic Performance Audit.