Do you want to sell your business? Prepare your business for a sale in the future? Or do you intend to raise venture capital for the next step in your business growth? Regardless of your plans, the first step to success is always a good preparation.
Based on our many years of experience, we have established a Top 15 of factors that all have a major impact on business value. Did you have high scores for all 15 factors?
Good, then a Dream Exit is within easy reach. Are there multiple factors that need tweaking? No need to worry. A nice exit is also feasible for you if you draw up a good action plan.
1. The recurring revenue is high.
Subscriptions, service and maintenance contracts or other licensing models are all forms of recurring revenue. Companies with high recurring revenue are much more interesting than companies that have to reset their revenue counter to 0 euros every month.
2. Low complexity
Don’t have to do much to acquire a lot of new customers in a very short time? Great! Do you have long implementation times, complex on-boarding processes or other factors that slow everything down? Then look at ways of reducing complexity.
3. High market potential
Companies with high market potential are often the market leader in one or two sectors with plenty of margin for growth in other branches. Are you a market leader in a specific sector and is there no prospect of growth in other segments? Then start thinking of a way to break through this cycle.
4. EBITDA is greater than 20%
Companies with healthy profit margins are always snapped up easily. EBITDA greater than 20% is an excellent way of measuring this. Does this seem impossible to achieve? Then look at ways of cutting costs or improving your margins in other ways.
5. A sticky business model
A sticky business model ensures your customers depend on your product or service. Cancelling or switching is not an option in that case! Often the product or process is part of the primary process, making it a must-have. If you sell a nice-to-have, then you need to think again.
6. You own the intellectual property
Do you own the intellectual property? Or do you buy your company’s most important value from third parties? This will have a negative effect on your business value. Property is crucial. You won’t be dependent on others in that case.
7. High international potential
Investors or buyers love companies with high international potential. It’s all about scalability. If you’ve already taken the first steps as part of your international expansion, then you have an attractive company. Often just demonstrating the potential is also good.
8. Low recurring expenses
Low HR costs, limited subscriptions, insurance and rent or actual hosting costs: take a critical look at these and other recurring expenses. Cut costs where possible.
9. Low dependence on human resources
Every successful company depends on a select number of employees who pull their weight. But it’s vital that your company’s success does not solely depend on these people. While their departure can come as a blow, every individual, including you, should be replaceable.
10. Proven track record
Success is valuable if you can demonstrate that it’s long-lasting. High NPS scores, reviews or good customer references are all part of your track record. But steady growth figures are also beneficial to your track record. The keyword is trust.
11. Your company is innovative
How innovative and future-proof is your company? Does it use pioneering solutions? Do you take an innovative approach to all of your products and services? The more innovative, the better.
12. The business model is difficult to copy
Do you own patents? Does counterfeiting your product or service take a lot of time and does it cost a lot of money? Then you have a big lead over your competitors. If your business model is easy to copy, then think about smart ways of staying one step ahead of the competition.
13. High level of automation
Every human intervention takes time and costs money. To which extent are your sales, marketing and delivery processes automated? Using CRM and ERP software is just one aspect of this. Successful companies will have automated as much as possible.
14. Low customer turnover
The growth figures are important when selling a business. But high customer turnover will have a negative effect on your business value. Pay attention to ways of retaining your customer.
15. Low number of shareholders
You want to prevent the sales process from becoming complicated because you have to heed every shareholder’s many requirements and wishes. Ensuring the number of shareholders is manageable is vital. In any event, designate one contact who represents the group.
You can use this Top 15 to analyze your company. Will you be assisted by your own team during the sale process? Or will you rely on an expert and independent third party to guide you towards your Dream Exit?
One thing’s for certain: you need someone whom you can trust. Someone who will also tell you the truth even if it’s unpleasant. Someone who keeps everyone on track.
You started this company out of passion. You’ve put your heart and soul into your business. And now you deserve no less than the grand prize.
So find yourself a consultant who will guide you towards the best possible exit when selling your business.