Since selling your business is likely the most significant and financially impactful transaction of your life, I share the Top 3 Sales Priorities every business owner must take to maximize their company’s sales price at Exit.
Unfortunately, Sales has been one of the most impactful, yet overlooked, aspects of Exit Planning.
Exit Planning Horizon
According to MidStreet Mergers & Acquisition, the average business takes 6-11 months to sell. Although some businesses may take less than a year to sell, many owners begin the exit planning process well in advance. Smart business owners start planning 2-3 years in advance of a desired transaction date so they can get their house in order to maximize their sale price.
Exit Planning Process
During the exit planning process, business owners are often encouraged to focus on the business’s financials, tax planning, and capital structure by CFOs, CPAs, bankers, and lawyers. These advisors often focus on what they know best – raising capital, balance sheets, financial ratios, cash flow, cost-cutting, insurance, and risk mitigation. While these are all essential components of preparing a company for a sale, who’s focusing on the top line?
Elevating Your Sales Price through Growth
During the exit planning process, it’s easy for owners to get distracted from growing revenue. As sales flatline, the growth rate can stall, and the organization loses momentum. The company’s value declines without demonstrable, steady growth to show a prospective buyer or banker. When it comes time to sell the company, missing your sales plan means accepting a lower multiple for the business. Improving your sales revenue, operating margin, and recurring revenue streams can make your business more valuable to a potential buyer by demonstrating that the company has grown, and is well-positioned to continue its growth, which improves the multiple your business can command.
Laying the Foundation
By now, you’ve already hired a solid management team, including an experienced COO, CFO, CPA, CMO, and CHRO. You’ve begun to forge long-term relationships with experts who will help guide you through the M&A labyrinth. You’ve likely engaged an experienced M&A Lawyer, an Investment Banker, a Wealth Planner, and a Business Insurance Broker, in your personal network of Advisors.
Strategic Value of an Exit Planner
One of the most important M&A professionals you can have in your corner is an experienced Exit Planner. Some will have a Certified Exit Planner Advisor (CEPA) credential. Interview a few, and find someone you like and trust. I’ve found that most tend to understand the tremendous value a Fractional Sales Leader can provide as they prepare a client for exit or transition.
Three Critical Sales Priorities
There are many things a business owner can do to help prepare for an exit. In my opinion, here are the three most critical Sales Priorities a business owner can take to maximize their business’s value:
Confirm You Have the Right Sales Leader. Make sure your Sales Leader (CSO/CRO/VP of Sales) has a track record of achieving the company’s weekly/monthly/annual sales goals and hold that individual accountable. Has he/she consistently achieved their annual sales goals? If not, why not? If their track record of delivering results has been inconsistent, your exit may be at risk. If you don’t have the right Sales Leader, hire one. If you can’t afford to hire one, engage a Fractional Sales Leader until the transaction is complete. If you’re unsure your Sales Leader is the right one, hire a Fractional Sales Leader to help with the evaluation. It always helps to have a second set of eyes on a critical hire, and this one might be your most critical of all.
Develop and Execute Your Sales Plan with a Laser-like Focus. One of the keys to achieving your desired exit is developing a realistic Sales Plan. Keep it simple and focused, while being detailed enough to provide insight across the organization. You don’t need to measure everything, instead, focus only on the variables that matter. Refer to my article, “Optimizing Sales Resources – 12 Helpful Tips.”
Develop Your Sales Plan. Generate 1-year, 3-year, and 5-year sales forecasts, based on a 2–3-year lookback. Compare historical Actuals vs. Forecast, Month by Month. Break down the sales forecast by product, channel, territory, deal size, term, and new vs. renewal, margins, while analyzing trends. Refine your Ideal Customer Profile, Value Proposition, Sales Process, and Compensation Plan. Refer to the Sales Xceleration article, “How Leaders Create Sales Action Plans to Improve the Bottom Line.”
Execute Your Sales Plan. Work with Marketing, Operations, Finance, IT, Customer Care, Product Management, etc. to get the Sales team all the support they need to meet or preferably exceed their numbers. Sales Plan execution is Mission Critical. As Ed Harris’ character, Flight Director, Gene Kranz, in the movie “Apollo 13” declared, “Failure is not an option!”
Remove Obstacles to Sales Success. As the business owner, regular meetings with the Sales Leader are critical to ensuring sales goals are achieved. Encourage openness, and ask if Sales is experiencing any obstacles that may impact their ability to achieve their sales goals. Be proactive in removing any barrier preventing the Sales organization from completing its mission.
Sales Metrics. Monitor the “In-Process” sales metrics, not just month-end results. In-process metrics may include the number of cold calls, doors knocked, proposals generated, or demos conducted. Use trend analysis to track these activity-based KPIs compared to earlier periods. These “leading indicators” are often indicative of the results ahead.
Improve Your Sales Infrastructure. Look for low-cost initiatives that accelerate Sales by making it easier, faster, and less costly to acquire and serve customers. To ensure efficient growth, leverage lower-cost sales channels like VARs, Wholesale, Subscription Services, Online Sales, Auto-Renewals, Telesales, etc. Be careful to avoid disrupting Sales when implementing a new initiative.
Compensation & Incentives. Ensure you have the right comp plan and incentive structure in place for your Sales team and update annually. Make sure it’s designed to drive both sales results and the right behaviors. Having one without the other leads to suboptimal performance. Refer to my article, “When to Update Your Sales Compensation Plan.”
It’s your name on the door. Most business owners have a tremendous amount of pride in the business they’ve built over the past 10, 20, or 30 years. They want to turn the keys over to the next owner, knowing it’s in great shape.
If you’re ready to explore exiting your business over the next 1-3 years, why not begin working with a professional Sales Advisor who can help you prepare for your transition? Contact Strategic Elevation today for a free, no-obligation discussion and sales assessment.