Congratulations to Heidi Ganahl and the team at Camp Bow Wow on the announced sale to VCA.

VCA to Acquire Camp Bow Wow Chain

Camp Bow Wow founder and Chief Executive Heidi Ganahl shelved plans for a day-care business for dogs after her husband died in a plane crash 20 years ago.

Now, after leaving a career in pharmaceutical sales, creating two startups that sputtered and spending most of a million-dollar insurance settlement, Ms. Ganahl has reminted herself a millionaire. She has agreed to sell Camp Bow Wow to VCA Inc. and join the Los Angeles pet health-care company to plot Camp Bow Wow's expansion.

VCA, which has a stock market value of $3.3 billion, operates more than 600 animal hospitals and provides diagnostic services to others. Terms of the transaction weren't disclosed. Franchisers such as Camp Bow Wow often are bought for single-digit multiples of the yearly fees they receive from franchisees. Camp Bow Wow collected about $4 million in such fees last year.

As part of the deal, Ms. Ganahl plans to hire a president to run Camp Bow Wow's day-to-day operations, while she, as chief executive, focuses on strategy. Camp Bow Wow's core business offers day care for dogs at franchise-owned facilities, starting at about $25 a day, as well as overnight boarding for between $40 and $60 a night.

Full article
http://online.wsj.com/articles/vca-to-acquire-camp-bow-wow-chain-1407175570

Don't miss another opportunity to sell during the upturn

[Editor's note:  In April 2009, we published this article. Many business owners had missed the window of opportunity to sell during the 2003 -2007 window when selling price multiples were at all-time highs. In 2014-15, we again have market dynamics that mirror 2006-7 - selling price multiples are again at high levels. It is a sellers' market with far more buyers than sellers. How long will this cycle last? . Many economists expect the next downturn as early as 2017. No one knows for sure. However, there is one thing for sure - if you missed the favorable opportunity to sell once, do not let it happen again.       -DPM]

Dan McCallin, former owner and CEO of Commerce City-based Timberline Steel recently made an interesting statement about his company: "We missed the selling boom of the late 1990's and were determined that we would not miss another opportunity to sell during the next upcycle. We decided to take the steps so that we were prepared." While Dan originally made that statement during the recession of 2002, and later sold the business in early 2006, it could certainly apply today. 

The full exit sales process may take several years.  With credit markets tight, the economy in recession, and bad news seemingly everywhere, it may seem counter-intuitive to be writing about preparing your company to be ready to sell during the next economic upturn. While some business owners may believe they can pull the string when they are ready, the truth is, for many business owners, it may be exit sales cycle may take several years to execute. Professionals will tell you that in order to sell at highest value, the process includes 1-2 years to get ready, 1 year for the transaction, and then you may have to spend another 3+ years with the company after the sale.

Much of the preparation can be accomplished during the down cycle. Companies can focus on making fundamental improvements to their business during the downturn that will help them emerge faster and healthier than their competitors.
1.    Focus on customer net profitability
2.    Upgrade management
3.    Cleanup business processes
4.    Develop a strategic growth and execution plan
5.    Position the company for the upturn
6.    Never waste the opportunity of a good downturn

Customer net profitability.
The tendency during a downturn is to cling to any customers and revenue no matter the profitability level. A common comment is that "at least they absorb overhead." The notion of unprofitable business absorbing overhead may be one of the greatest false beliefs in business. In many cases, overhead that has been viewed as fixed is really a cost that can be minimized or shed. Carrying unprofitable business will be a continuing cash drain that may inhibit your business' ability to grow as the economy improves.

Upgrade management.
There is a great supply of good talent now available in the marketplace. In many cases this may be talent that would not be available in better times. Take advantage of the opportunity to improve. Similarly, this is a great opportunity to review all of your employees and weed out those with below average performance, poor potential, or unrealized potential. Our clients use a simple tool to rank all employees in terms of potential and performance - the results make it very clear which ones have been a drag on the company.

Cleanup business processes. During boom times, many companies claim they are too busy to scrutinize business processes to make improvements and to streamline in order to increase throughput. That "excuse" typically does not apply during the downturn.

Develop a strategic growth and execution plan. You need a plan not only to help you survive the downturn, but also that will allow you to be agile enough to take advantage of opportunities in the recovering marketplace. There may be market segments that will be slow to come back; some may never come back the same way. Other market segments, however, may present huge new opportunities. Your organization needs to develop a plan and be prepared to execute.

Position your company for the upturn.
The most significant competitive gains are made during a downturn. Companies that are prepared and well-positioned can accelerate very quickly as he markets healthy. Competitors that are under stress during the downturn will actually be under greater stress as the economy improves. Cash demands can be low when demand is low. Cash needs, however, will increase as the economy improves. Companies will need cash to hire more people, invest in inventory and equipment, etc. 

Never waste the opportunity of a good downturn
During downturns, companies have the opportunity to examine everything, reduce unnecessary expenses, trim those under-performers, examine unprofitable business, streamline business processes, etc. 

Take a lesson from the Boy Scouts: Be prepared.
These steps can add value to your business - even during a downturn. When the economy improves, your business can accelerate faster and be well- positioned. The market for selling a business will be ripe in late 2010 and 2011. Those businesses that are ready will find a hungry group of buyers and investors who have been sitting on their hands during the recession.
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What's the old saying - "Miss your chance once, it's a shame; Miss twice, shame on you!"

If you have not yet prepared your company ready for sale, we can help. The Mead Consulting Group has been helping companies prepare to maximize value for exit for many years. We have helped over 50 client companies successfully sell outright or recapitalize their business to take "chips off the table." See what some clients have said about their experience with Mead Consulting.

Bio-Techne Acquires Novus Biologicals for $60M

• MINNEAPOLIS, July 2, 2014  Bio-Techne said Wednesday it closed on its $60 million cash acquisition of Novus Biologicals, a deal designed to expand the buyer’s antibody business while complementing its operations in developing and manufacturing purified proteins.
  Novus maintains portfolios of both outsourced and in-house developed antibodies and other reagents among its offerings of more than 250,000 products, delivered via its own digital commerce platform. That’s more than 10 times the 24,000 products in Bio-Techne’s portfolio, which during the 2013 fiscal year accounted for about $311 million in net sales.
  Novus is the second company to be acquired in less than a month by Bio-Techne. On June 17, Bio-Techne shelled out $300 million for ProteinSimple, whose Western blot products are among its offerings of systems and consumables designed to simplify protein analysis workflows.
  Bio-Techne said the Novus deal will enable it to access antibodies for potential inclusion in new assays and kits, as well as for instruments the acquiring company said it intends to bring to market after it completes the deal.
  Bio-Techne also said it expects to draw upon Novus' digital marketing capability and management team as it expands its offerings—notably cytokines and growth factors, antibodies, immunoassays and biologically active small molecule compounds, all sold to biomedical researchers and clinical research laboratories.
  Bio-Techne is the common brand name under which Techne brought its R&D Systems, BiosPacific, Tocris Biosciences, Boston Biochem and Bionostics products earlier this year. The company is headquartered in Minneapolis and has more than 1,000 employees worldwide.
  "This acquisition is consistent with our mission to expand our products offering and ensure that our customers are being served in the most complete fashion with the best quality reagents," Bio-Techne President and CEO Charles R. Kummeth said in a statement.
  Added Novus’ CEO Karen Padgett: “The combined business will represent a unique one-stop-shop for our world-wide customers."
  Bio-Techne said it will retain Padgett and another Novus executive, Dave Eansor, who serves as svp, corporate development.
  Mainsail Partners, a growth equity firm based in San Francisco, has been the sole investor in Novus since 2008.

http://www.genengnews.com/gen-news-highlights/bio-techne-acquires-novus-biologicals-for-60m/81250060/

MINNEAPOLIS, July 2, 2014 /PRNewswire/ -- Techne Corporation (NASDAQ: TECH) (d/b/a Bio-Techne) announced today that it has acquired Novus Biologicals for $60 million in cash. The transaction was financed with cash on hand.
Novus Biologicals is a Littleton, Colorado-based supplier of a large portfolio of both outsourced and in-house developed antibodies and other reagents for life science research. Their collection of greater than 250,000 high-quality products delivered through an innovative digital commerce platform provides customers a unique, one-stop shopping experience.
Bio-Techne is a leading developer and manufacturer of purified proteins -- notably cytokines and growth factors, antibodies, immunoassays and biologically active small molecule compounds which are sold to biomedical researchers and clinical research laboratories. Novus Biologicals is an excellent complement to the expanding Bio-Techne portfolio of products and its addition is consistent with Bio-Techne's overall goal of providing customers the most comprehensive product line for their research needs. More specifically, Novus adds strength to Bio-Techne's antibody business and provides access to a wide range of high quality antibody content for potential inclusion in new assays and kits, as well as for use with instruments Bio-Techne intends to offer following completion of a pending acquisition transaction. In addition, Bio-Techne expects to leverage Novus' excellent digital marketing capability and their strong management team.
Charles R. Kummeth, President and Chief Executive Officer of Bio-Techne, commented, "This acquisition is consistent with our mission to expand our products offering and ensure that our customers are being served in the most complete fashion with the best quality reagents. Over the years the R&D Systems brand has developed a strong reputation for quality reagents for life science research through its protein, antibody and immunoassay product lines. We appreciate the fact that customers' reagent needs change and Bio-Techne wants their first choice to be a Bio-Techne branded product when selecting a supplier of reagents for their experimentation. Therefore, an expansion of our antibody portfolio was a logical step in our long term strategic business plan. We are eager to adopt the digital commercial platforms that Novus Biologicals has perfected over the years to accelerate the growth of our overall business."
Novus Biologicals Chief Executive Officer, Karen Padgett, commented, "We are delighted to partner with Bio-Techne since we see this as a strategically good fit. Both Novus Biologicals and Bio-Techne have a desire to improve life science research by providing customers with the widest array of technical solutions and tools. The combined business will represent a unique one-stop-shop for our world-wide customers."
The Novus Biologicals leadership team, Karen Padgett, and Dave Eansor will remain in place. Mainsail Partners, a growth equity firm based in San Francisco, has been the sole investor in Novus Biologicals since 2008.

For full article in Wall St Journal  http://online.wsj.com/article/PR-CO-20140702-909861.html

Improving Your Business: One Profitable Customer at a Time Part 2 - A process to improve profitability

[Editor's note: During the downturn that started in late 2007, most companies did an excellent job of reducing expenses and improving cash flow. However, we have observed in the last 18 months a disturbing trend. In the drive to improve the top line, companies are beginning to lose focus on the importance of "profitable growth." We decided to run a series on profitable customer growth. In Part 1 we outlined how a few customers can drive net profitability. This is Part 2 - a process to improve profitability. We hope you find it useful. -DPM]

  Improving Your Business: One Profitable Customer at a Time

  Part 2 - A process to improve profitability

 

Many managers seem to rely on intuition to determine if a customer is profitable or not. Sometimes the intuition is correct and sometimes it is not. Besides one's intuition not being correct, relying on intuition to determine customer profitability confuses the organization. Why? One's intuition varies greatly depending upon position in the organization and how the relationship is viewed. For example, for the sales vice president trying to make a sales goal, that unprofitable customer can be very attractive. For the technical director who must provide support to that same customer, the relationship appears very unappealing. There must be a process for assessing customer profitability and it needs to be used consistently throughout the organization. Here are some suggestions:

Define your core strengths 

 

Customer profitability centers on what a company does well and then matches these strengths with a customer group which values them. BMW is known for its ability to design and produce high quality cars with great road handling characteristics. As an organization, it understands this strength and seeks to cater to customers who seek cars that have excellent handling characteristics.

Take a hard look at your organization. What does it do exceptionally well? What differentiates it in the market? Ask this question of people throughout the organization. The responses may differ based upon who you talk to but you should hear some consistency about the core strengths of the business. Expand your analysis beyond internal perceptions; ask your better customers why they buy from your company. This is the first step in identifying where your organization needs to focus its efforts.

Study and Determine the characteristics of profitable and unprofitable customers.

 

Take the top 10% - your most profitable customers. Do these customers have similar characteristics (e.g., technical requirements, order size, etc.)? What types of products and services do they purchase? Are these customers more profitable because they are more loyal (sales and marketing expenses are less)? How do the characteristics of this customer group align with your company's strengths? You will likely see an alignment if you look closely enough.

We have worked with a company in the software industry with a long history of profitable growth. Its projects are typically long-term in nature and management takes customer selection very seriously. The company's disciplined customization and project management process includes a great deal of client collaboration. At the heart of the process is developing a good understanding of project objectives and the customer's customer. Key to the company's long success has been selecting clients whose approach fits the process and are good candidates for repeat business. The company avoids single project clients shopping solely based on price, since this approach does not fit well with their collaborative process.

After you have looked at your top customer group, repeat the process with less profitable customers. What are the common characteristics of these customers? They are likely very different than those more profitable customers.

Establish guidelines for evaluating customers.                                                          

 If you wish to move beyond simply talking about customer profitability, you must establish guidelines for evaluating customers. Guidelines could include:

• order size (orders in quantities the company is set up to handle)
• product mix (customer is not just cherry picking to get the lowest priced products or services. This is important if you offer loss leader products)
• technical support requirements (can the customer be effectively served?)
• growth potential (does this customer have the potential to grow?)
• how long will you let a customer receive special treatment on "potential" alone

As you can see from the above list, it is a combination of financial measures, buying practices and long-term potential. Do not worry about developing the "perfect" measure. The most important thing is to develop consistent parameters that make sense for your business. If you apply these criteria consistently, you will see a clear segmentation between your best and worst customer relationships.

Taking Action - One Customer at a Time

Now that you have defined the profile and characteristics of profitable customer relationships, begin putting the evaluation process into action. One of the first places to start is with prospective customers. Focus your energies and sales efforts on prospects consistent with your evaluation criteria. Prospects that do not fit most of your evaluation criteria are not likely to develop into long-term profitable customers. Make sure your sales team has a clear understanding of the types of prospects you are targeting.

As you attempt to improve profitability, focus on your top quartile relationships as these customers often represent one of your best growth opportunities. Map out clear strategies for retaining and growing these relationships. Learn more about your customers' businesses and how they serve their customers. This collaboration can uncover new opportunities and help you forge stronger relationships. As you eliminate the unprofitable relationships, this frees up time and other resources for your more profitable customers. This is an important principle of executing a successful fewer and deeper strategy.

 

Don't fire unprofitable customers. Modify the unprofitable behavior.

                                            

What can you do about unprofitable relationships? Be aggressive about changing those unprofitable relationships. Make certain the sales team understands that the customer must become more profitable within a given time.

Don't just fire customers, however. Often, it is we, the sellers,  who have encouraged or permitted "unprofitable behavior." These customers may offer profit potential - particularly if they fit many of your evaluation criteria. Look for differences in how you are serving these customers versus your more profitable segment.

You may be overlooking product or service opportunities that could enhance profitability, or you may be making inaccurate assumptions about client needs. One client's management team believed it was obligated to supply certain customers with unprofitable commodity products in order to sell more profitable, high margin product lines. Interviews with customers revealed otherwise. There were many alternatives for procuring commodity products and customers were primarily interested in the more innovative, higher value product lines. A subsequent change in product mix has boosted profitability significantly.

If a path to profitability cannot be found, use pricing as a way out of a relationship. Be sure to provide recommendations for alternative vendors. You never know when an unattractive customer can change and become desirable.

Many successful middle-market companies take pride in their premium, high touch service levels. Each customer usually receives the same products, services, and delivery regardless of profitability. This approach, combined with the size or buying practices of some customers, makes some relationships appear hopeless. If there is no clear path to profitability under your current product and services umbrella, consider offering alternative services for these customers. This may be a particularly viable alternative if you have a large segment of unprofitable customers with similar needs. Depending on your business, alternative services may entail different methods of selling (e.g. inside sales vs. more costly face-to-face), a different scope of service or different pricing structures. These changes can completely change the profitability picture for these customer relationships.

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The Mead Consulting Group has been helping clients identify and improve customer net profitability and execute strategies that drive profitable growth. For a free consultation, contact me at meaddp@meadconsultinggroup.com or (303)660-8135

A few good customers can drive your growth

[Editor's note: During the downturn that started in late 2007, most companies did an excellent job of reducing expenses and improving cash flow. However, we have observed in the last 18 months a disturbing trend. In the drive to improve the top line, companies are beginning to lose focus on the importance of "profitable growth." We decided to run a series on profitable customer growth. We hope you find it useful. -DPM]

Improving Your Business: One Profitable Customer at a Time

Part 1 - A Few good customers can drive your growth

Over the last few years there has been increased focus on the strategy of "fewer and deeper" as a strategy for growth. The logic of this strategy is straightforward-focus your resources on a fewer number of customers with whom you can have a deeper relationship and this will cause increased growth. Please note that we are not advocating extreme customer concentration, as this leads to excessive risk and can be a discounter of value when a business looks to sell. In this series of articles, we will address how to improve business results dramatically by gaining a deeper understanding of most profitable customers.

Selecting the Right Customers

In most businesses, a relatively small number of customers generate the bulk of the revenue (typically 20% of customers generate as much as 80% of revenue). One recent client derived 98% of their revenue from only 25% of their customers. This client assumed that the remaining 75% of the clients represent high margin business and thus, a greater share of profitability. Unfortunately, for this client and many similar companies, this usually is not the case. According to this study of retail banking performed by KPMG, 140 to 170% of profits can come from 20% of customers while 80% of losses can be attributed to only 20% of customers.

Research completed over the past fifteen years by The Mead Consulting Group, with data from over 1900 companies ranging from $4 Million to over $5 Billion in revenue, shows a similar pattern. The Table below illustrates an extreme example. In one company as few as 2% of the customers generated 800% of the profits, while the losses are generated by fewer than 10% of the customers. The balance of the 88% of the customers, remaining in this example, is about breakeven.

Tier	# Customers	% of Total Customers	Net Profits (Loss)	% of Net Profits (Loss)
Tier 1	19	2.0%	$8,648,185	801.5%
Tier 2	845	88.1%	($43,160)	(4.0%)
Tier 3	95	9.9%	($7,526,025)	(697.5%)
Total	959	100.0%	$1,079,000	100.0%

   

Below, we will address the costs of unprofitable customer relationships and suggest strategies you can put in place in your business to improve profitability and begin to implement a "fewer and deeper" strategy for growth.

The Cost of Unprofitable Customers

There are several reasons why managers pursue unprofitable customers. One of the biggest we have found is the passion that many middle-market company managers and business owners have for selling. These managers often place a premium on attracting new customers and generating top line revenue growth. This passion for the top line may be rooted in a fear of not having enough customers should there be a business downturn. This approach can lead companies in a wrong and unprofitable direction. If managers do not focus efforts on the right (profitable) customers, the same passion that was a driver in building the business can become a downright anchor, dragging down profitability.

An in-depth analysis of one client company revealed net profit would be two and a half times higher without 65% of its customers! This client provided a striking example of the cost of unprofitable customers. This manufacturing company provided excellent service and, as a result, continued to expand its number of customers over the years. Each year they added customers and seldom, if ever, lost a customer. Unfortunately, 65% of their customers made up a paltry 5% of total revenue. To make matters worse, these small customers were the most frequent buyers of the company's most unprofitable product lines. A detailed analysis revealed the company's net profit would be two and half times higher without 65% of its customers! We did not advocate "firing" these customers but rather provided a procedd to improve profitability which we will cover in the next article in this series.

Some of the failure to focus on more profitable customers comes from inadequate accounting. Companies, large and small, struggle with how to measure customer net profitability accurately. In many companies, management may know how much gross profit they are generating from each customer. The problem often occurs in the costs that occur after gross margin. The resources it takes to sell, administer, and service customers makes the issue of real profitability more complicated. For example, consider the customer with a relatively small level of sales but a healthy gross margin in both percentage and absolute terms. This customer buys frequently (lots of invoices), has high service requirements (always orders at the last minute and expects overnight delivery), and stretches payment terms to 120 days. This may not be a truly profitable customer. On the other extreme, it could be a large customer who purchases a significant volume and has a gross margin that is relatively lower as a percentage of revenue. This customer purchases in larger quantities (fewer invoices), has reasonable service demands (does not order at the last minute), and pays in a reasonable amount of time. Which one is the more profitable and more desirable customer? This is a question that is too infrequently asked in many companies because such "below-the-line" costs are not known.

Opportunity cost - time with marginal customers versus time with high potential customers. Even if you are confident that you can accurately determine customer profitability, there is an additional factor to consider - opportunity cost. What is the opportunity cost of having a salesperson travel to see a marginal customer versus spending time with top priority customers and prospects? Costs such as these make the bottom quartile of your customer base even less profitable than you may realize. These relationships not only result in poor customer profitability, but can also be a detriment to other existing and prospective customer relationships. Executing a "fewer and deeper" strategy requires you to focus your resources on relationships that matter.

Next - Part 2 - A Process to Improve Profitability

Common misconceptions about selling a business

[Editor's note:  This eLetter was first published a couple of years ago. It received such positive response that we decided to update it  and run it again -DPM]

  Common misconceptions about selling a business  

It appears that we may be entering the next big surge in business transition activity fueled by the retirement needs of aging baby boomers. The first baby boomers turned 67 years of age in 2012 and we are beginning to enter the years with greatest numbers of boomers. It was estimated that in 2012, based on slow activity in 2008-2011, there were between 1.2 -1.5 Million boomers (with businesses between $2M and $80M in revenue) who would need to sell to provide liquidity for retirement. That number will continue to grow each year. 

  

If you are a business owner contemplating a sale somewhere in your future, consider these common misconceptions about selling your business.  

       · I know the buyer - they are in my industry.   Many business owners think they already know the prospective buyers - from their industry.  However, in many cases where a sales process is conducted by an investment banker, an "outlier" (either a strategic or financial buyer) surfaces with an offer significantly higher than from those you may know. Many times these come from outside your industry.

·       The market will be better next year.   Procrastination can cost you. Sellers in 1999 or 2007 will tell you that they wished they had sold while the market was hot. In 2014 and 2015 there are more buyers than sellers - this won't continue with the aging demographics of business owners. 

·        I don't want to sell until I have to (Dismal D's).  You want to sell when your business is healthy and when you don't have to sell. Life can take cruel twists and turns. Business owners without a plan can find themselves subject to the "Dismal D's" - Death, Disability, Divorce, Dissenting Owners, Declining market, Debt overload, or just pure burnout. It is hard work to sell your business. You'll need plenty of energy and motivation to maintain performance during the sales process.

·        The investment banker or M and A firm will build value or help create my business strategy. No they won't - that's not their job! A good investment banker can help you yield value, attract a broader market of potential buyers and get a deal closed, but they don't have the skills or background to build value.

  

Danger point: Some small M and A firms will offer free or low cost strategic or operational services and advice in order to get your sales transactional business, but these are either young, inexperienced associates or people who have not really run a business like yours. They may be very good at selling your business, but what they don't know can hurt you. If an investment banker is offering to help you with your business strategy, you should question why. Stick to investment bankers that stick to their core competency - selling a business.  

·        My lawyer (or CPA) (or Wealth Manager) will help me find a buyer. Finding a buyer is very different than finding the best buyer, the right buyer. Investment bankers do this every day. Most professionals understand what they do well....and what they don't.  Find the right tool for the job!

·        I met a guy in my CEO peer group /My investors know a banking firm.Selling your business may be your most important business decision. Get help in making an informed decision about selecting an investment banker or other professionals such as accountants, tax counsel, and transaction attorneys. Learn about possible (but undisclosed) conflicts of interest, differences between firms, level of expertise that will work on your company, etc.  Have you checked with previous clients that were both successful and unsuccessful? Mead Consulting clients use a checklist of questions to help make the appropriate choice.

·        It only takes 6-12 months to exit a business.  Nothing could be further from the truth. In order to realize the maximum value it may take you 1-2 years to prepare the business, 12 months to do the transaction, and then you may have to remain for 3 more years with the company after the sale. Rushing a company to market without proper preparation will cost you as buyers will discount values for companies without an adequate strategic growth plan, strong management, or a clean review of due diligence issues.

·        Selling will only take some of my time.  The biggest mistake business owners can make is to allow business performance to slip during a sales process. The primary reason for deals to either fall apart - or become heavily discounted - is because of deterioration of revenue and earnings. Business owners can dramatically underestimate the amount of time and energy it will take to both sell the business and maintain performance during the process.

The Mead Consulting Group helps business owners navigate through a successful sales process, including preparation (value creation), selection of the right team (investment bankers, transaction attorneys, tax counsel, etc.), and the sale process itself. We focus on maximizing value and leverage the business owner's and management's time so that they can focus on maintaining business performance. Contact us for more information.    

                                 ________________________________________

 

The Mead Consulting Group has helped over 50 clients prepare for successful sales transactions ranging from $15M to $350M in transaction value. We help companies increase the value of their businesses leading up to a transaction, minimize the things that cause potential buyers to discount the price, prepare to best position the company, and assist the owners in building a  transaction team.

 

What successful business owners say about us:

 ...We could not have completed the sale of our business without the advice and guidance of The Mead Consulting Group. Their experience was critical in helping us prepare, and endure, the transaction process to a successful outcome. ...Charles M, President, Healthcare IT Company

 

A successful process is draining and stressful.  The Mead Consulting Group brought the experience and expertise necessary to help our team focus on the critical issues and not get caught up in the multitude of items that can derail a transaction.  Why reinvent the wheel?  We chose to take advantage of individuals who could help us understand the nuances, negotiate effectively, and close the deal. ...  Ken W, CEO, Behavioral Healthcare

...We missed the opportunity to sell our family business during the last upcycle. Mead Consulting helped us grow revenue and EBITDA to record levels and guided us through the selection of a transaction team. Dave Mead and his group provided great counsel throughout the sales process, removing obstacles and firmly encouraging us to a great deal with a strategic buyer that mirrored our family business values. ...Dan M, President, Building Products Company

...I do not know why anyone would attempt to sell their business without Mead Consulting. Since they have owned and sold their own businesses, they understand the challenges of continuing to run the business while trying to sell it. Their experience kept us focused on the right things and they helped keep our transaction team well-aligned during the process. They truly act as the advocate for the CEO and owner, helping to make sure that it was the best deal for the owner. ...Ron T, CEO, Software Business

Prepare your company to be bought

Prepare your company to be bought

[Editor’s Note: Many business owners fail to prepare their businesses for a sale either because they believe that a potential sale is far off in the future or because they are focused on current issues and do not consider preparation to be a priority. We would submit that companies need to be “prepared to be bought.” Sometimes lucrative offers come unexpectedly for companies that are well-positioned. We typically recommend that a company engage an experienced investment banker to assist them in a sale – often even if they have received an offer – in order to generate a competitive environment.

Some business owners who have tried to “time the market” at some point off in the future have found that unpredictable events such as the 2007-2012 recession, credit and stock market crunches, tech bust(s), 9/11, industry issues, etc. can derail their ability to sell at maximum value. We recommend to our clients to work each year to make certain that their companies are currently desirable to buyers. – DPM]

How best to position a company to be attractive to buyers:

1.    Demonstrate Strong Financial Performance

a. Historical Financials
•    Consistent revenue growth (at least upward trend)
•    Recurring revenue is a plus
•    Strong operating margins
•    Increasing profitability
•    Importance of last twelve months

b. Operating Cash Flow
• Focus on hitting projected revenue and earnings numbers
• Review net profitability of customers and products

2.    Maintain “clean” financials

a. Audited or “auditable” Financial Statements
•    Have your financial statements audited with a reputable firm to add credibility
•    Use GAAP accounting. If not, identify how practices differ from GAAP
•    Understand cash vs. accrual accounting – timing differences can be material

b. Income Statement Adjustments and “Add-backs”
•    Buyers are skeptical of earnings that rely on substantial add-backs (one-time, non-recurring charges, private company expenses, etc.)

3.    Diversify your customer & supplier base
•    Diversification signifies a healthy business and reduces risk
•    Buyers will pay less for companies dominated by one or two customers
•    Examine what % of sales your top 10 customers represent?
•    How stable are your top suppliers? How stable are their terms?
•    Do you have multiple suppliers for critical components/services?
•    What % of total purchases does your top supplier represent? Top-5 combined?
•    What % of the company’s sales are related to a few key employees?

4.    Develop a Strategic Growth Plan
•    Maintain a clear strategy and be able to demonstrate your history of execution
•    Be able to articulate specific future growth opportunities
•    Position your company to take advantage of them

5.    Build a capable Management Team
•    Invest in training and key strategic hires, if needed
•    Motivate management to add value to the company through a potential sale
•    Focus on building a deep management team that can thrive without your continued leadership

6.    Eliminate potential “Gotchas”(these are items that could result in significant discounts to value)
•    Maintain legal documentation (licenses, regulatory filings, contracts, intellectual property, incorporation, etc.)
•    Clear title to all assets
•    Document processes and procedures
•    Resolve legal disputes


7.    Build a team of Qualified Advisors
•    Minimize distractions from running your business effectively
•    Get advice from professionals who have expertise in areas you do not and have done it before
•    Beware of advisors that outstep their areas of expertise

Are you and your company ready if a buyer appeared on the radar?
Most business owners who have executed a successful sale of their business will tell you the most important thing is: BE PREPARED.

Selling a business is very different than operating a business. As a business owner you know your industry, your product or service, your customers and your markets. Most business owners will only sell a business once in their lifetimes - and it can be by far the most important financial transaction of their lifetime.

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The Mead Consulting Group has helped over 50 clients prepare for successful sales transactions ranging from $15M to $350M in transaction value. We help companies increase the value of their businesses leading up to a transaction, minimize the things that cause potential buyers to discount the price, prepare to best position the company, and assist the owners in building a  transaction team.

What successful business owners say about us:

 ...We could not have completed the sale of our business without the advice and guidance of The Mead Consulting Group. Their experience was critical in helping us prepare, and endure, the transaction process to a successful outcome. ...Charles M, President, Healthcare IT Company

A successful process is draining and stressful.  The Mead Consulting Group brought the experience and expertise necessary to help our team focus on the critical issues and not get caught up in the multitude of items that can derail a transaction.  Why reinvent the wheel?  We chose to take advantage of individuals who could help us understand the nuances, negotiate effectively, and close the deal. ...  CEO, Behavioral Healthcare

...We missed the opportunity to sell our family business during the last upcycle. Mead Consulting helped us grow revenue and EBITDA to record levels and guided us through the selection of a transaction team. Dave Mead and his group provided great counsel throughout the sales process, removing obstacles and firmly encouraging us to a great deal with a strategic buyer that mirrored our family business values. ...Dan M, President, Building Products Company

...I do not know why anyone would attempt to sell their business without Mead Consulting. Since they have owned and sold their own businesses, they understand the challenges of continuing to run the business while trying to sell it. Their experience kept us focused on the right things and they helped keep our transaction team well-aligned during the process. They truly act as the advocate for the CEO and owner, helping to make sure that it was the best deal for the owner. ...Ron T, CEO, Software Business