Businesses that sell do 5 things very, very well:
#5. They Are Cause, and Not Money, Driven. Highly valued companies are culturally cohesive and have causes beyond money that motivates them.
Take a look at the famous mission statements below and how these company’s iconic brands align with them:
Google: “To make the world's information universally accessible and useful"
Facebook: “To give people the power to share and make the world more open and connected"
Zappos: “To provide the best customer service possible”
Southwest Airlines: “To fly safe, with high frequency, low-cost flights that can get passengers to their destinations on time and often closer to their destination”
Disney: “To create happiness by providing the finest in entertainment for people of all ages, everywhere"
An acid test of a business’ “above the line” value is whether or not its mission and brand have similar alignment.
Now if you have neither a brand nor a mission and yet harbor a dream of a business exit, then it is time to get to work.
#4. They Have Valuable Intellectual Property. Companies rich in intellectual property in all its forms – patents, processes, and people – attain purchase offers on factors other than last year’s earnings.
Try this on for size – an analysis of over 300 patents acquired between 2002-2008 found an average price per patent of $383,000!
The lesson is clear - whether you are in a low or high-tech business, ask yourself daily what is proprietary about what you do and how you do it and then work to protect it.
#3. They Communicate VERY Bright Futures. Businesses that sell for high multiples communicate exciting future, profitable growth.
The focus is on the word communicate. The value of a business can be doubled and tripled and more simply by credibly and excitedly forecasting its growth.
This is not easy – it requires managers to demonstrate deep understandings of the impact of the big 21st century “macros” – technology and globalization, and the micros, especially how their companies will become learning organizations that adapt and grow as change happens.
All this translates into a well-developed story that there is gold (and a lot of it!) at the end of their business rainbow.
#2. They Are “Cleanly” Managed and Run. A business, like a great product or service, must be cleanly packaged, neatly wrapped, to attract its highest price.
So if you are selling at a high price, no messy financial statements because of poor accounting, no incomplete or shoddy corporate records because of poor or non-existent legal counsel, and no boring or lacking in credibility “future stories” because of poor exit planning and investment banking advice.
And oh yes, it is very hard to “clean up” a business at the time of sale – to do it right the work must be done in real time and / or started years before a sale is contemplated.
#1. They Are Lucky. Entrepreneurs and executives that build sellable companies embrace the role of luck in business success.
They cultivate a mindset of positive expectation – a firm and abiding belief that they will either find a way or make one.
Goethe said it best:
“Concerning all acts of initiative (and creation), there is one elementary truth that ignorance of which kills countless ideas and splendid plans: that the moment one definitely commits oneself, then Providence moves too. All sorts of things occur to help one that would never otherwise have occurred. A whole stream of events issues from the decision, raising in one's favor all manner of unforeseen incidents and meetings and material assistance, which no man could have dreamed would have come his way. Whatever you can do, or dream you can do, begin it. Boldness has genius, power, and magic in it. Begin it now."
So how about you?