This article focuses on the latter scenario – taking time to build your value to get the most from selling your company. Before helping you plan for this approach, an advisor will do a careful review and analysis of your financials and give you their recommendation on whether waiting could bring you greater value or diminish your sale price.
For clients who have been advised to wait and “train”, advisors will recommend a series of cost-cutting, revenue boosting and repackaging initiatives to make the company the most appealing it can be to a potential acquirer.
Coaching a foodservice distributor to improve the owners’ likelihood of achieving a maximum valuation can take many forms, and can involve any of the following:
Advising on capital spending decisions: Will new assets add value for a future buyer? It may not be advisable to build the new addition if it detracts from your balance sheet and does not add to the sale price. A similar analysis is necessary when considering replacing software, warehouse equipment and trucks.
Refining your accounting and reporting in anticipation of a sale. A better sale result will occur if your financial reporting allows you to accurately measure the cost centers of your business to reduce operating costs. It’s equally important to have clarity in the sources of gross profit and in earned income. These measures will enable the coach and the potential seller to set a course to improve both.
Segmenting your customer base: Clarifying the revenue and gross profit by customer segments will enable the coach and the seller to adjust revenue components to the most desirable mix for the potential buyers. For example, the decision to take on new chain business can enhance or reduce the value of the business – outside, objective advice can keep you from falling into a trap.
Personnel decisions: Filling or not filling positions during the coaching and pre-sale period can have an impact on interim profits, which in turn, will have an impact on the valuation of the business. Often a buyer will look at a business and ask, “Does the seller have the right people in the right positions so that I can improve the performance of the company after I purchase it?
Remember that, especially in today’s economy, you may or may not have time to enact all of these improvements, but a good advisor will be able to tell you which coaching tactics they are going to employ, based on the lead time you have, to drive the highest valuation for your business.
Bill Beattie is Managing Director at Keiter Stephens Advisors.
Keiter Stephens Advisors (www.ksadvisorsllc.com) is the foodservice distribution finance and consulting subsidiary of Keiter, Stephens, Hurst, Gary & Shreaves. They have worked with over 50 privately-held distributors across the country. KSA services include:
• Mergers and Acquisitions: guiding the sales and acquisitions of foodservice distributorships and regional sales territories
• Profitability Improvement on both the vendor and customer sides
• Custom Strategic Services, including transition planning for family-owned
distributors and driving management consensus with KSA’s 3-1-1 Planning Process
• Custom Finance Solutions, including finance strategy development,
distribution center expansion analysis, lease or buy decisions on real estate
and equipment, and cost segregation studies.