Are you Looking to Sell or Get Investment For Your Business?
Do you know what your business is worth in your head? Have you tried to raise money or sell your company recently and been surprised at the results? Sometimes it is hard to realize that a business you have given your blood, sweat and tears to is not worth what you think to a potential buyer or to others you have asked to invest. There are many reasons why this could be the case.
Articulating the Value
A fundamental reason a business is turned down for purchase or investment is the lack of the owner to truly articulate the company and the value to a buyer or investor. Here is a list of questions you will want to be able to answer about your business.
Do you have a business plan that outlines what products or services you sell?
Can you explain the size of the market you are in and the percentage of the market you have?
Who is your target market, and in what geographic regions do you sell your products?
Who are your main competitors, and how do they compare in size to your company?
What is your business value proposition?
Have you made enhancements to keep your product or services current? Do you have a product or service roadmap?
What profit has been made over the last five years on sales, and is there an upward trend?
Is the market/industry you are in growing or declining?
Are there other vertical markets that you could address?
What is the length of your sales cycle?
What sales channels are you currently using?
Have you considered expanding your channels?
What marketing mediums are you currently using to help sustain and grow your business, and do you know if they are working?
Are your products easy to sell, or do you need specialized training?
If something happened to you or any of your employees, would the business be sustainable, or is the business built around you or someone on your team?
These are just a few questions that an investor or a buyer will ask you, and you need to be ready with an answer. Sometimes it is a harsh reality, but you must first put yourself in their shoes. If you were going to invest in a business or buy one, would you do so without knowing whether it was sustainable, transferable, or profitable? Your business is important to you, but an investor or buyer needs to see a return for their investment or purchase.
Understanding the Buyer or Investor
I enjoy watching the Dragon's Den on CBC, as I find it interesting to watch how prepared or unrehearsed company owners are when presenting to a panel of potential investors. If you listen to the questions that the Dragons ask the owners and then watch the blank stares or the deflection they try – the harsh reality is that it takes more than being passionate about a business to be successful. When someone comes in with $0.00 in revenue and wants $250,000.00 in investment for 10% equity in their company and has not figured out that they are putting a value on their company of $2.5M, it is a hard lesson learned. One also must understand that no one will invest in or buy a business they do not understand.
You should not be discouraged. All is not lost just because your business is not at a point to sell or receive an investment today. An excellent book to read is John Warrillow's book "Built to Sell." This book is a fantastic read, and it tells the story of a man who owns his own advertising boutique business and his journey to make his business sellable. Just because your business is not there today does not mean you cannot get there in the future. It is better to find out and make the necessary changes versus waiting until it is too late.
Summary
If you are interested in getting further investment or selling your business, you will want to find out if your current business is sustainable, transferable, and profitable. If you cannot answer these questions, we can help you understand your business to the level needed through business coaching. If you want to know what your business is worth today, we can also help you by providing you with a business valuation.