Looking to raise money for your business?
Or to sell it to a strategic or financial acquirer?
Well, an analysis of over 10,000 companies who recently raised growth capital or sold all or part of their business…
…shows they all have at least one of these five “all star” qualities:
All Star Quality #1: Rising Sales.
All Star Quality #2: Intellectual Property.
All Star Quality #3: Hot Markets.
All Star Quality #4: Dynamic Leadership.
All Star Quality #5: Solid Profits.
For better or worse, there are very few “five star” companies among us.
And even more, companies that rank highly in all five probably should not approach the capital markets or seek buyers as they are unlikely to garner fair and full value for their awesome qualities.
All other businesses should rate themselves on each, as in:
On all star quality #1 Growing Sales. Very simply, on what percentage basis are sales increasing? 10% annually? 20%? Or more?
And over the past few years, how consistent has this growth been?
And on what basis? Increasing sales from $10M to $15M over a few years is far more impressive than doing so from 250K to 375K, and so much better still when it is consistent versus erratic and uneven growth.
So importantly, this star attribute says nothing about profitability because it is more than good enough (especially in these great markets) to just grow sales to attract meaningful financing and purchase offers.
Similarly, a high enough rating on all star quality #2 – Proprietary Intellectual Property (IP) – can overcome most other business shortcomings.
As with growing sales, some kinds of IP are more valuable than others, but IP in modern business goes beyond just patents.
It can and should include more qualitative elements like workflow efficiencies, brand and reputation, relationships with core suppliers and vendors, and even – especially if they are impressive enough – culture and values.
Wise executives describe and define their company’s IP in manner and forms that best serve them – i.e. they make the rules as to what their company’s IP is and how it should be valued.
All star attribute #3, Hot Markets, can be understood through simply asking: does or does not the market in which our company competes have “buzz”?
Industries and markets with buzz – like artificial intelligence, blockchain, cannabis, entertainment, education, healthcare, hospitality, robotics, virtual reality and more – create auras of excitement and tailwind that imbibe otherwise “boring” businesses with growth mystique and credibility.
Smart and effective executives procure quality information and intelligence on their markets and industries, and know how to use it to serve and support their growth strategies and investor / acquirer promotional efforts.
Which leads us to all star quality #4 – Dynamic Leadership.
This rating can usually be determined by business performance on the first three categories – i.e. businesses in hot markets with growing sales and proprietary IP are usually well led.
But to be considered truly great, executives must convert on their success in these first 3 categories with demonstrated performance in the 5th and most important all star quality – solid profits.
Because when a business consistently creates cash, it can pretty much do everything else wrong and still be okay.
What is so revelatory is that the vast majority of companies that approach the capital markets don’t make a lot of money.
And if they do, they don’t do so consistently.
So while financiers and acquirers prefer to invest in and buy profitable companies, what they have to choose from are moderately or inconsistently profitable ones that that rank high elsewhere.
So measure your business against these all star attributes.
And then drill down and work relentlessly to improve the inputs that determine each of them.
As you do, you might be surprised that the business is “all star enough” to attract interesting, high value suitors.
Because in the end there are no “perfect” companies among us, only those with the least and best covered up flaws.
Want to Know Your Business’ All Star Rating?
And find out how all star you really are!