How to Make Your Business Easier to Sell

Every week I get sent a few businesses for sale. I may be interested in buying one myself, or I may know someone who could be.

I give the initial information a quick look. If it doesn’t clearly explain the business, the financials and why the opportunity deserves more attention, I usually move on. I don’t want to start hunting for basic information just to decide whether the company is worth considering.

A buyer's first decision isn't whether to buy your company. It's whether your company is worth more of their time.

Make the First Look Count

Earlier in my career at Bank of New York Mellon, I worked on more than 300 mergers and acquisitions. Part of my job was putting together the pitch decks and financial analysis used to present companies to potential acquirers.

There is a natural flow to a good presentation. It should explain what the company does, how it makes money, how it has performed, what makes it attractive, the important risks and why the opportunity deserves a closer look.

The pitch deck is not the data room, and it doesn’t need to answer every possible diligence question. Its job is to make a serious buyer want to keep going.

When important information is missing or poorly presented, the buyer has to assemble the story themselves. They start requesting financials, supporting information and explanations simply to understand what is being offered.

Don’t make buying your business an Easter egg hunt.

Start Before You're Ready to Sell

You don’t need years to prepare a pitch deck. You may need years to prepare the business the pitch deck will eventually describe.

Sellers almost always have a good story about the future. Revenue is going to accelerate. Margins are going to improve. Profits are going to increase. The next few years are going to be much better than the last few.

Maybe they will be.

Buyers place more value on results you can prove than improvements you promise.

Instead of telling a buyer the next few years are going to be amazing, spend the next few years making them amazing.

If looking at the company through a buyer’s eyes exposes weaknesses in the business, address them while you still have enough time for the results to prove the changes worked. There is a big difference between saying, ‘We just fixed this,’ and showing a buyer an operating history demonstrating that you did.

That is why preparation should begin before you’re ready to sell.

Make the Numbers Match the Story

I recently reviewed a tequila company that was for sale. I was told the business was profitable, but when I looked at the financial statements, they appeared to show that the company was losing roughly $500,000 a year.

I passed. I wasn’t looking for a turnaround.

The business broker followed up and told me I had misunderstood the financials. According to him, the company was profitable, so I went back through the statements and cash flows to see what I had missed.

I still couldn’t reconcile what I was being told with what I was seeing.

Maybe there was a reasonable explanation. Maybe it was a terrific company. I never found out.

They made understanding the business my problem, and I wasn’t willing to spend the time solving it.

A buyer may not keep digging until they eventually discover why your company is better than it appears. If something unusual in the financial statements needs an explanation, provide it. If there are legitimate adjustments to earnings, identify and support them. If the pitch deck and the financials appear to tell different stories, resolve the contradiction before the buyer has to ask.

Do the buyer’s analysis before the buyer has to do it.

Make It Easy to Trust and Verify

I learned an even more important lesson while pursuing another acquisition.

I liked the company and became serious enough to begin due diligence. But getting important information became increasingly difficult. As I dug deeper, I discovered that material information had been deliberately withheld and that some of what I had been told about the company and its relationships was not true.

Those discoveries materially changed my view of the value of the business. Its financial condition was also far worse than it had initially appeared. In my assessment, the company was effectively insolvent.

I walked away.

When a serious buyer has to keep digging for information, eventually they start wondering what you don’t want them to find.

Every company has risks, weaknesses and problems. A buyer can evaluate a known issue when it is disclosed and explained. What damages trust is discovering material information that should have been disclosed earlier.

I’ve seen diligence start to feel like a deposition. The buyer asks a question, the seller answers exactly what was asked and nothing more. Eventually, the buyer starts wondering whether they are seeing the complete picture or simply haven’t figured out the right question yet.

A buyer should not have to ask the perfect question to discover something important.

A prepared seller creates the opposite experience. The financial information is organized. Important documents are available at the appropriate stage. Answers are straightforward. The risks are disclosed. The evidence supports what the buyer has already been told.

That builds confidence.

Tell the Story. Prove the Story. Confirm the Story.

I think about the sale process in three stages.

The Pitch Deck Tells the Story

It gives a potential buyer enough information to decide that the company deserves more attention.

The Supporting Information Proves the Story

The financial statements, contracts and other documentation substantiate what has been presented.

Due Diligence Confirms the Story

The buyer verifies the important information rather than repeatedly discovering facts that change their understanding of the company.

The pitch deck, financials, supporting information and management’s answers should all tell the same story.

A buyer should not discover your business during due diligence.
Due diligence should confirm what you've already shown them.

Hand the Investment Banker a Business That's Ready

By the time you bring in an investment banker, much of this work should already be done.

A good banker can refine the presentation, position the company, identify potential acquirers, create competition and manage the sale process. But ultimately, they are marketing the business you hand them.

They shouldn’t have to start by figuring out what they’re selling.

You want to hand them a company whose story is clear, whose financials support that story and whose important information is organized and ready to be verified.

Then let them do what you hired them to do.

The best time to discover what a future buyer won’t like is while you still have time to do something about it.

Why Rick's Perspective Matters

Rick Norris, CFA has spent more than 35 years working with businesses from multiple perspectives: as an advisor, a buyer, a seller and an operator.

His experience includes more than 300 mergers, acquisitions and financing transactions at Bank of New York Mellon, including helping finance Disney’s acquisition of ABC and working on transactions involving Microsoft, Intel and Hilton Hotels. He has also founded, bought, operated and sold businesses of his own.

That combination gives Rick the perspective to see both how a business operates today and how a future buyer is likely to evaluate it.

See Rick Norris’s full bio

Thinking About Selling in the Next Few Years?

Let’s spend 30 minutes looking at your business through a future buyer’s eyes and identifying what could make it easier to understand, verify and eventually sell.

Getting the business ready to sell is only part of preparing for an exit. The next question is how much of the value you created you ultimately keep.