Before selling a business, it is important to understand why someone would want to buy it. The concept is similar to why customers buy your products or services, but a little different. A plain vanilla, me-too business or product is not easy to sell. To help sell your business to buyers, or to sell your products and services to customers, it is a good idea to find out what is special about your business. It is also important to know how to communicate what's special.
Whether the competition is across the ocean or down the street, there are reasons why customers buy from your company. Everybody says they have great customer service, delivery times, and quality, but how does the company really compare to the competition? What are the concrete metrics that you use to judge your own performance, such as key performance indicators (KPIs)? It is important to measure the right criteria, measure improvements over time, and constantly work to improve those KPIs.
If your company did not have something special, you would already be out of business. Most likely, you, the owner, are special in several ways. However, unless you plan to stay with the business, the buyer cannot acquire you for very long. Successful owners usually have put together a strong team and have learned to delegate responsibilities to that team. Having a strong team makes the business much more attractive for a buyer.
All companies and sectors in the U.S. are suffering from a labor shortage, but some companies can attract employees better than others. Think about what makes your company culture more attractive than the next. Buyers will worry that your team and staff may not adapt to change, that they lack energy, or cannot be innovative. It is not easy to define company culture, but try to find out what is positive about your company’s culture and make improvements while you can.
Again, our customers buy from your company for a reason. If the company is not special now, it is possible that the company was special in the past, but things may have not changed in 20 years. Some companies have incredible customer lists with plenty of blue-chip customers, but it turns out that most of the designs are legacy products. Eventually, the customers will not be too lazy to go somewhere else. Buyers of the company will be afraid that an acquisition will give customers the excuse to look somewhere else. Once you find the specific reasons why customers buy from your company, you can articulate that better into a sales message for your organization. Buyers will pay more for companies that have a clear market advantage.
There is a lot of very old, used equipment in both the PCB and PCBA sectors, but the tide has been turning for a while. Growing companies in these sectors have lots of new equipment in the right places and are using that equipment to push the envelope on new technology. Some companies are able to use old equipment, duct tape, and bubble gum to manufacture high-end products, but that situation will not last forever. If your maintenance person is the most important employee in the company, it is probably time to start investing in new (or newish used or refurbished) equipment.
New equipment is a means to becoming more efficient and implementing new technology. Your customers should look to you to assist with the implementation of new technology and designs. The company should be able to point to several examples in which you helped customers with design issues using unique technology.
Business owners often complain about price competition; however, growing companies that have unique technology can charge premium prices. To receive a premium for both the company’s products and for the sale of the company, learn to articulate what is so special about the company. A clear, strong message is easier to communicate and will help the organization grow.
As an M&A advisory firm, our job is to find out what is special about the company and relay that message to potential buyers. Sometimes, we think we know what’s special, but we find out later from a buyer that a certain aspect of the business is truly special that neither the owner nor we had considered. At times, the business can be a special strategic fit for a buyer, but no one outside of the buyer's business would have known that. Admittedly, understanding what is truly special about a company is not always an easy task.
In general, we find that growing companies know what is special about the business and continuously work to improve the company's competitive advantages. What is special today will be ho-hum tomorrow, so an owner must keep working at it. Neither customers nor buyers want to have to work to figure out what is special about the business, so being able to clearly articulate what is special will help the company to grow and attract strong offers when it is time to sell.
Tom Kastner is the president of GP Ventures, an M&A advisory services firm focused on the tech and electronics industries. He is a registered representative of StillPoint Capital, LLC—a Tampa, Florida member of FINRA and SIPC—and securities transactions are conducted through it. StillPoint Capital is not affiliated with GP Ventures.