Selling your business is likely the most important deal of your career. Depending on a range of factors, the business will likely sell for between 5X and 10X EBITDA. No other deal comes close in affecting as much value.
But most business owners do not invest sufficient resources to maximize the value of the business when they sell. They think that hiring an investment bank to run a process is sufficient. But there is so much more that one than can do to increase value. Investment banks run a process to create competition so that they get the most value for “the business as it is.” What they do not do is drive changes to make the business more valuable.
The key is to take concrete steps to improve the drivers of value. What drives value? Let’s look at how private equity groups value businesses:
Enterprise value = Revenue x EBITDA margin x EBITDA multiple
Taking tangible steps to increase revenue growth, expand margins, and build a better strategy or reduce risks (which improves the multiple) are all levers that make a business more valuable.
Investment banks will tell the best story they can with the business at hand. The way to maximize value is to create a better story by tangibly improving the business. Our blog will tell you how to build that better story.