The Importance of the Marketability Assessment to Attract Buyers to Your Business

By Joe Oddo

Joining the conversation at the recent North Charleston Business Expo, I heard this from the CEO of Lee H. Moultrie & Associates, LLC: “The most efficient entrepreneurs have figured out how to articulate the objective, scope, and advantage of their business in a simple statement, because they know that if they can’t, then neither can anyone else.”

Working with entrepreneurs daily provides me with a unique window into what drives them, how they think and solve problems, and how they build great business enterprises. It is fascinating to learn from those who have mastered their craft and reached the peak of their profession by employing sound strategies to grow their business.

Also presenting was J.R. Kramer of Summerville, SC who explained, “Most smart business owners have earned devoted buy-in from their people by soliciting useful feedback. Successful entrepreneurs invite dissent to build others’ commitment, then articulate the strategic directives so their team both understands and believes in the mission.”

After pouring their heart and soul into building something special, smart business owners know that gradually applying these tactics will impact future value many years before considering an exit strategy to transition to new ownership. When it’s time to cash out, you can be sure that these owners will employ a Marketability Assessment as an early strategic step to start the transition process.

Benefits of a Marketability Assessment

Increased Valuation: The assessment empowers you to address weaknesses before they become apparent to a prospective buyer, giving you leverage toward a higher value during negotiations.

Targeted Marketing: The assessment allows you to tailor your marketing strategy to attract the most suitable acquirers, maximizing your chances of a successful deal.

Improved Deal Readiness: The process allows you to proactively address structural concerns before entering negotiations. By addressing potential issues early on, buyers will see a more resilient and sustainable business, shored up and prepared for the scrutiny of due diligence.

Stronger Negotiating Position: A clear understanding of your company's competitive advantages and marketability empowers you to negotiate from a position of strength. You'll be able to confidently advocate for your company's true value and secure the best possible outcome.

What is a Marketability Assessment?

A Marketability Assessment is an invaluable tool that could mean the difference between a good deal and a great one for mid-market companies. The marketability assessment serves as your secret weapon, making your business attractive to more potential buyers before going live to market.

Taking you through a series of questions – survey style – we analyze your business through six different metrics, identifying areas for improvement.

This comprehensive report identifies your company’s strengths and weaknesses. It goes beyond the financials, giving you relevant insights on how to improve your value proposition and command a higher price.

Here’s the Analysis in More Detail.

Financial Performance: Strong financials are obviously a major selling point in any transaction. Most owners understand lowering their risk profile by dissecting their cash flow and highlighting their financial health. This assessment will carefully analyze your profitability, growth trends, revenue diversification, and debt levels. Evaluating your internal processes, cost structure, and overall operational effectiveness leads to more streamlined operations – key ingredients of a profitable and attractive company.

Market Position: Though it may be hard to judge market share, it is important to evaluate your competitive landscape, your customer base, and industry trends. Each market discovery aids in crafting your most effective marketing campaign. Directly addressing the growth potential within your industry can be achieved by becoming a niche leader or operating in a high-growth market. A recent search firm that we sold had a very specialized niche in the higher education industry and was well-known and respected by their competitors.

Customer Base: A strong, loyal customer base with a recurring revenue stream is a goldmine for acquirers. This demonstrates a stable foundation for the future profitability and long-term viability of your business, as long as it is not too dependent on a small, focused customer base. Diversify your client base so you don't become reliant on a single large client or a small group of customers. One recent sale had to be structured with a deferred payment earnout to minimize the risk incurred by having one client responsible for over sixty percent of company revenues.

Growth Potential: By analyzing your future growth prospects, new market opportunities, and the scalability of your current business model, you can set realistic goals. Actions that demonstrate your company’s commitment to achieve future growth involve new market expansion, new products or services introduced, or acquiring complimentary business by expanding operations to reach new customer segments.

Wild swings in revenue that happened in the last few years are usually averaged out when valuing the company, but upward revenue trends and their corresponding projections will spark interest as investors are always looking for upward movement.

Dependencies on Suppliers: Having too few supply vendors can be solved by developing relationships with multiple reliable suppliers for critical resources. This minimizes the risk of disruption if a single supplier encounters problems.

Owner & Management Dependency: This analyzes dependencies on key employees, most often the owner. The experience, capabilities, and reputation of your leadership team are critical assets. A strong management team with a proven track record inspires confidence in the acquirer's ability to maintain and build upon your company's success post-acquisition, ensuring that the company's success will continue after the sale.

I asked Lee Moultrie what happens when the company becomes too reliant on the owner for day-to-day operations? His response, “This can lead to burnout, missed opportunities, and difficulty attracting investors or future leadership.”

The good news is that these potential points of failure can be corrected using any variety of at least nine actions. Here are the two most common:

Empowerment: The Key to Building a Self-Sufficient Management Team. Delegate tasks effectively and trust your qualified personnel to contribute their ideas and make decisions. This fosters ownership and develops a strong management team that can run the business effectively. J.R. Kramer suggests, “Encourage employees to take ownership of their roles and responsibilities, fostering a sense of accountability and contribution to the bigger picture.”

Standardize: The Key to Strengthening Internal Systems and Processes. Document key processes, procedures, and decision-making frameworks to ensure consistency and smooth operation. This ensures that everyone knows how to get things done and creates a knowledge base that is independent of any individual. It also standardizes operational procedures across different departments, streamlines workflows, and makes the business less reliant on the owner's direct involvement.

Look for more corrective actions in upcoming articles.

Who Conducts Marketability Assessments?

To ease the complexity of navigating the M&A landscape, a Marketability Assessment is a crucial first step toward maximizing your proceeds from a business transition. In preparation for every sale, our valuation professionals use this assessment to help your company achieve a premium Fair Market Value, significantly increasing your chances of a successful and lucrative M&A transaction. Don’t underestimate the power of the Marketability Assessment to provide insights to elevate your value proposition and attractiveness to potential acquirers.

Selling your business: Steps for Success

Even if you are five years or longer away from deciding to sell, it is essential to start the preliminary marketability analysis and prepare, so the business is seen in the brightest light.

Maybe you already run your business like it is always for sale by ensuring that it is operating as efficiently as possible. That’s good, because your business should be so attractive to a buyer – that you would buy it!

We have performed hundreds of business valuations. Once you confidently know the Fair Market Value of your business you can start deciding on a timetable, figuring out the tax implications, or updating your business plan for enhancing the appeal to prospective investors.

Our firm’s competitive transaction fees are based on successfully completing transactions. For more information, please contact Joe Oddo at 703-338-0200 or write4u@consultant.com.

Maximizing Your Return When Selling Your Business

Goose Creek, SC - January 2023. Every new season bring fresh forward reflection. For business owners, that could entail formulating a picture of what an exit from your business would look like.

Though a majority of owners have up to 75% of their net worth tied up in their business, most do not have a formal plan in place that deals with the inevitability that they will not work forever. Having a plan in place not only provides a level of comfort, but it also allows you to start thinking about the next chapter in your life.

Maximizing your financial exit using our Mergers & Acquisition (M & A) Intermediary service provides you the highest degree of confidentiality while walking you through the various steps of the process. These include the financial recasting, developing the confidential marketing, delivering a qualified buyer, setting up a proper introduction, then seeing it through to closing.

Even if you are five years or longer away from deciding to sell, it is essential to start the preliminary marketability analysis and prepare, so the business is seen in the brightest light. Maybe you already run your business like it is always for sale by ensuring that it is operating as efficiently as possible. That’s good, because your business should be so attractive to a buyer – that you would buy it!

If you haven’t considered the depth of the process, here are some of the steps along the way:

Identifying a trusted M&A Advisor for facilitating the process.
Recasting of financial data in order to show real cashflow, legitimate addbacks, and other seller discretionary income sources (first assignment for M&A Advisor).
Fair Market Valuation.
Blind Profile.
Confidential Marketing.
Careful Prospective Buyer Screening.
Introduction of the Buyer to the Seller.
Negotiation.
Offer-to-Purchase.
Due Diligence.
Financial Arrangements.
Legal Document Preparation.
Closing.
Post-Closing Tax Implications.

Taking all these steps on your own would be impossible while simultaneously trying to run the business. Potential buyers pay careful attention to how you generate cashflow, so in order to maximize your return, none of the above should distract you from that mission. Plus, since the business must be operating at maximum efficiency to appeal to the prospective buyer, any leak in confidentiality would impair the ability to consummate a deal.

Commissioning a Certified Business Valuation from your M&A Advisor is a smart first step which can be done long before you are ready to sell. This gives you a baseline on the Fair Market Value of your business as an ongoing concern. Once you confidently know what your business might bring on the open market, you can start deciding on a timetable, figuring out the tax implications, or updating your business plan for enhancing the appeal to prospective investors.

Each step can be extended, delayed, or put off indefinitely, but these steps cannot be shortcut. This is where the value of our professional M & A service is most realized.

Contact me now to discuss a marketability analysis. Everything we do is completely confidential. There is no risk or obligation in simply speaking with us to explore this opportunity.

E-mail me, or call (703) 338-0200 to discuss options and get more details on the process.

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Joseph Oddo, Managing Director

Direct: (703) 338-0200 / write4u @consultant.com / linkedin.com/in/josephoddo

Don't sell products, sell dreams.

- Steve Jobs

Financial Performance
Market Position/Competition
Customers and Sales
Growth Potential
Supplier/Customer Dependency
Owner/Management Dependency.

Our Strength

Joe Oddo

Mergers & Acquisition Advisor, Professional Writer, Business & Campaign Strategist, Public Speaker.

Blind Profile
Confidential Marketing
Careful Buyer Screening
Introduction Buyer/Seller
Negotiation.
Offer-to-Purchase
Due Diligence
Financial Arrangements
Legal Document Preparation
Closing
Post-Closing Tax Implications

Steps 3 - 14

Buyers seek businesses that provide a serious cash flow. So put on your buyers hat, and scan your business for how to improve the edges.

Can the new owner expect to retain your current clients? Does your business plan or business model need modernized?

We can help with these.

Charleston SC, USA 703-338-0200 write4u@consultant.com

Write Consult 703-338-0200