Strategic Financial Advisor for Growth-Stage Companies | Founder & Managing Partner, The CEO’s Right Hand.
When you’ve reached a point with your business where you’re starting to think about selling, it’s important to look at your organization through a buyer’s lens. How exactly will potential buyers assess your company’s value? What will it take to convince them that your products or services are a good bet? And how can you assure them that your management team has what it takes to succeed?
That last question is a doozy because it forces you to reexamine the merits of your team and decide whether you’re truly ready to pursue a sale. After guiding many clients through this process and buying and selling companies of my own, I’ve come to realize that there are three key things smart buyers tend to look for in a management team.
If you built your company from the ground up and hired people who genuinely believe in what you offer, you may be in good shape here — even if your team lacks certain skills for their given roles. Although you may have reached the limits of what you can personally do for the business, your management team may stay with the organization after the transition. Ideally, they’ll be energetic, excited and ready to take the next step.
From the buyer’s perspective, this is the best-case scenario and is what we refer to as an A-team. Savvy buyers usually would rather take an A-team and a B-company than vice versa because they know that the business lives and dies with the people who run it.
A motivated team is coachable. Coachability typically trumps innate skills in the buyer’s eyes because it means your team will have the drive required to learn. You can teach people management skills and help them learn new disciplines. You can also bring in the structure the business needs to succeed — the proper systems, reporting and analytical rigor, for instance.
If your team is there purely for the paycheck, however, or if they have ownership in the company and are planning to cash out, you have some work to do. A professional buyer will likely sniff this out immediately because they know an apathetic, low-energy team will have a harder time making the transition, will be difficult to train and may never deliver.
2. A Deep Understanding Of And Compassion For Your Customers
The market is overflowing with companies that have “solutions” that are looking for problems. In other words, instead of building a product that solves a real problem for real customers, these organizations develop products with little thought about who their target audience is and what they want. Then, they try to manufacture a reason for people to buy those products. Businesses of this nature are typically a bad investment.
In my experience, buyers tend to seek management teams that are more interested in serving the needs of their customers and solving their pain than in making a profit. These teams strive to know everything about their customers, down to the last psychographic detail, because they want to build a solution their customers will truly value.
Why does this matter so much? Because these teams have initiative and purpose. They know who their customers are and where to find them, and they’re determined to make them happy. They’re disciplined and focused with their approach to adding value, and that makes it easier for a buyer to step in, contribute to their mission and ultimately deliver a return on the investment.
3. A True Sense Of Empowerment
In many cases, business owners who are looking to sell their company are planning to step down when the deal closes. And this is fine, even desirable, unless you’ve been calling most of the shots and haven’t distributed responsibilities to your team, empowering them to run the company.
There are exceptions to this, of course. Sometimes the owner stays on for a certain amount of time because their knowledge is so proprietary that they must help with the transition. But most of the time, professional buyers look for a management team that can function independently of the owner.
So my advice to any business owner who is thinking about selling their company is to make yourself redundant. Before you start looking for a buyer, hand over responsibility to other people on your management team and give them ample time (at least six to 12 months) to operate in those capacities before you plan to leave.
When you’ve taken your company as far as you want to and are preparing for a sale, assess your management team from the buyer’s perspective. Does your team exude passion? Are they hyper-focused on delivering value to your customers? And are they capable of running the business without you? If not, take the time to make some changes. An A-plus management team that’s motivated to succeed is much more likely to attract high-quality buyers who are willing to pay top dollar.
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