You believe your business is worth $70m but the buyer thinks it’s worth $30m. You want to place a pre-money value of $40m on your early stage start up but the investors can’t see past $20m. As the owner of a private company you could always compromise and accept that lower valuation. Assuming you have a valuation gap, and you don’t want to compromise, then you’re left with only one option. You need to scale from where you are today.
Next week, The Portfolio Partnership (TPP) will publish their latest white paper covering the work we have been doing to scale New England businesses over the last 8 years. We are closing valuation gaps every month, by deploying operational blueprints that work.
The white paper will explain how we start every scaling project with a test – The Saleability Test. I first published this test in my book, Growing A Private Company in 2001, and the team have continued to tweak the questions from time to time. The essence of the test is to determine the company’s exposure to dependency.
Buyers/investors don’t like dependency. It can be dependency on the owner, one customer, a supplier, a coder, a geographic region or a product. Dependency kills deals.
The Saleability Test is a scorecard measuring 15 criteria that influence the value placed on businesses by buyers. Using these criteria we will explain some practical actions you can take to close valuation gaps and ensure your team are working on the right stuff.
If you would like your own personal pdf version of our new white paper, Valuation Gaps & How To Close Them, please feel free to email me at Ian@TPPBoston.com.