Don't Miss the opportunity to sell during this upcycle

We missed the selling boom during the last positive cycle and were determined that we would not miss another opportunity.

In one of our Breakfast briefing series a few years ago, Dan McCallin former owner and CEO of Timberline Steel made an interesting statement: "We missed the selling boom during the last positive cycle 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 While Dan originally made that statement during the recession of 2002, and later sold the business in early 2006, the message could certainly apply today. We are in the tenth year of this upcycle. We have all learned that economic cycles don't last forever.

The process for you to exit your company may take the better part of a decade. With interest rates still near record lows, the economy still in expansion mode, and sales multiples at high levels, there may be a tendency on the part of business owners to think that the good times will continue for the foreseeable future. While some business owners may believe they can pull the string when they are ready, the truth is, for many business owners, the exit sales cycle may take several years to execute. Professionals will tell you that in order to sell at highest value, the process includes 1-3 years to get ready, 1 year for the transaction, and then you may have to spend up to 3 years with the company after the sale.

Companies can focus on making fundamental improvements to their business that will help them make their company healthier and more attractive 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 to succeed in any part of the business cycle

Focus on customer net profitability. The tendency 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.  While talent availability may be tightening, 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" can ultimately cost you when you try to sell.

Develop a strategic growth and execution plan. You need a plan that will allow you to be agile enough to take advantage of opportunities in the marketplace. There may be market segments that have been 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.

Never waste the opportunity to improve. Take the opportunity to examine everything, reduce unnecessary expenses, trim those underperformers, examine unprofitable business, streamline business processes, etc. 

   

Take a lesson from the Boy Scouts: Be prepared. These steps can add value to your business. Your business can accelerate faster and be well- positioned to succeed in any market. The market for selling a business will likely continue to be ripe through most of 2019. Those businesses that are prepared and ready are finding a hungry group of buyers and investors with lots of "dry powder" that they need to invest. 

The Mead Consulting Group has been helping middle market companies for over 30 years to add value and prepare for a successful transition. Our clients have consistently enjoyed better results. Investment bankers have told us that our clients are among the best prepared they have ever represented.

What you didn't know about Mead Consulting might surprise you.

 

 

The Mead Consulting Group has been helping lower middle market companies for many years.We don't toot our own horn...we don't advertise....We let our clients' success speak for us...But there are some things about us that may surprise you.

Did You Know?   We don't put junior people on your projects.   We've been there before!     Our senior consultants have been in your shoes and have fought the same battles.  More about our consultants...  Did You Know?   36 years in business    Most people are surprised to learn that we have been in business for 36 years   and have   30+ senior consultants focused on helping lower middle market businesses Did You Know?   We work with companies at inflection points   We typically engage with companies with revenues of $10M -$250M, but  we have clients that range in size from $5M-$2Billion in size. The common point is that all are at "crossroads."     Did You Know?    Our clients have been   very successful    Our clients get results! We focus on the execution of strategic plans and operational improvements  More about our client results....  More-See what business owners say about Mead Consulting  Did You Know?   We work with companies through all stages of growth   > Strategic growth & execution > Improving profitability & Cash flow  > M&A and Integration  > Maximizing Value for Exit > Generational transition   Did You Know?  The Healthcare market has fundamentally changed! Our Healthcare and Life Sciences Practice helps companies with market positioning, accelerating market access, market revitalization and reimbursement     More about Healthcare and Life Sciences      Did You Know?   We have experience across a number of industries   > Industrial          ---Manufacturing            ---Distribution   > Business Services    > Software > Technology      > Healthcare & Life Sciences   > Consumer Products    > Education       > Building Products / Specialty Construction   Did You Know? We have helped numerous clients dramatically improve profitability and cash flow  More about Customer Profitability     Did You Know?    We have helped many clients prepare, add value and navigate through successful sales transactions and generational transfer     Value/Succession/ Exit Planning   More about Maximizing Value for Exit...       If you want to move your business from a good business to a great one, contact Dave Mead at (303) 660-8135 or meaddp@meadconsultinggroup.com for a free consultation.  About Us               Why Choose MCG                    Services                     Our Blog

Is it time to start getting prepared to sell?

[Editor's Note: At a recent gathering of business owners and CEOs, the subject of timing to sell came up. One business owner offered that, with the election of Donald Trump, we could expect another 4 to 8 years of economic growth. He said that he was not going to consider selling his business at this time. While I did not counter his argument directly, I suggested that history tells us that in general terms business cycles are politically agnostic - the cycle does not care who is in the White House. I hope you find this article thought-provoking         -dpm]

FACT: History tells us that this economic expansion cannot continue much longer. The last 3 economic expansions in the United States have averaged 7.9 years, the 7 expansions before those averaged 6.2 years. We are currently at 7.8 years in this expansion. While most economists expect 2017 and 2018 to be good years, a few reliable forecasters (and there are only a few economists who are reliable in forecasting) predict that the 2^nd half of 2018 may usher in a downturn through 2019-2020. Whether that timing is precise or not, it is highly unlikely that we will see this current economic expansion continue for another 4 years.

Are you thinking you might be selling your business in the next 3-6 years? If so, then you may be surprised by the following: It is time to start the preparation process RIGHT NOW!

Selling a business can be one of the most significant events in the life of an entrepreneur. Not only is there a lot of emotional capital to deal with, but many business owners often have the bulk of their wealth and retirement assets tied up in the value of their business. Sell it for the right price and retirement is fantastic! Sell it for far less than you expect, and retirement may not be retirement at all. Sell it in the right way, and your legacy continues; sell it without forethought and planning, and your employees may be out on the street.

Today's sellers' market may be transformed into a buyers' market. The last few years have been an extraordinary time for sellers. Interest rates make borrowing for buyers inexpensive, and there have been many more buyers on the market than sellers. Competition among buyers for good companies is intense and sales multiples are at record high levels,

What most business owners don't realize is that there is a coming buyer's market for businesses. Here's why: there are a lot of Baby Boomer entrepreneurs who have built great companies and run them for 10, 20, 30 years or more. They are thinking about harvesting their investment and doing something else for a lot of good reasons. Some believe that they have met their financial retirement goals and they can back off, others have just lost enthusiasm, and some, unfortunately, have personal or family issues that preclude them from the continued necessary time and energy investments. Some have been advised that it is risky to have "all of their eggs in one basket", and want to sell a portion of their business to diversify their retirement portfolio. Many, including me, expected this bubble of sellers to occur before now, but with the stock market boom, changes in retirement age expectations, etc., this boom has not disappeared, it has merely shifted. (After all, none of us are getting younger!)

At the same time, the next generation of workers are very entrepreneurially focused themselves. They often want to start their own businesses rather than buy an existing one, even though the risk of failure is much greater. That means there may be fewer interested buyers for your business when you need them most.

Why think about it now? It may take longer than you think. If you plan to sell in several years, you have a lot of time to think about it, right? Not really. Most owners and CEOs of middle market companies may not realize that it can take 3 - 6 years to make the most graceful and profitable exit. At a high-level, the timeline can look something like this:

1. Prepare the business for sale (18- 36 months)
2. Locate buyers, negotiate the deal, and execute the transaction (6-12 months)
3. Owner or CEO commitment to support the transition to new ownership (6 -36 months)

You can always "sell now, as is" if you want, but you may be leaving MILLIONS of dollars on the table by doing so. Preparing your business for sale today means that you will have a lot of flexibility as to when and how you execute the transaction.

Another critical reason to prepare your business for sale is simple: life happens.Any number of unexpected and unfortunate events can disrupt your operations and your plans, and frankly, the older you are, the more likely some of them are to occur. These nasty little possible surprises include:

• Death,
• Disability
• Divorce
• Dissenting Owners and
• Declining Markets

On the positive side of the coin, there are any number of wonderful things that might come your way, too, such as:

• An opportunity to purchase a competitor,
• A significant offer by a competitor or private equity firm,
• A great expansion opportunity, or
• A buyout offer from a partner.

If you are prepared for sale, then your company has a higher value to competitors, partners, private equity firms, and lenders. You will absolutely be in better shape to take advantages of the opportunities that come your way, too.

So here's the bottom line: if you want to sell your business on your terms, then you need to begin right away to run your business to increase its value and develop a business transition strategy.

Preparing your business to be ready for sale. In order to sell quickly and for a great price, you have to have exceptional value. And as with a private home, you will be far better off working ahead to prepare your business for sale.

When you stage a home for sale, you paint the walls, fix the roof, take out half of your stuff, landscape a little, and remove the personal distractions. You work with a real estate agent / broker to sell your home and you get out of the way. The process is disruptive, but hopefully only for a few months.

When you stage a business for sale, the process is dramatically different. You want to present a picture of healthy profitability trending upwards with a management team that will stick around after the sale. You need to communicate with great confidence that the customers and partnership relationships you have spent years developing will transfer to the new owners. And as with selling your home, you need to get out of the way - the new owners need to be convinced that the business will operate smoothly without you.

In summary, the five things that most purchasers look for are:

• A solid performance history
• A capable management team
• A great growth story, including recent steady growth and strategic growth opportunities
• Consistently improving cash flow and EBITDA
• A smooth and thoughtful transition plan and no due diligence surprises

Unfortunately, the sales process is often disruptive to the business. Handled poorly, it can take months and you may lose valuable customers, momentum, and employees. The more carefully you plan for the transition, the less time it will take and the more business value and momentum you will maintain.

The Mead Consulting Group has been helping middle market companies for over 20 years to add value and prepare for a successful transition. Our clients have consistently enjoyed better results. Investment bankers have told us that our clients are among the best prepared that they have seen.

If you would like to discuss how we might help your company begin the process of adding value and being better prepared, please contact me. 

Congratulations to Bev Freedman, Bob Malone and the team at The Assist Group on the sale to strategic buyer Equian

Congratulations to Bev Freedman, Bob Malone and the team at The Assist Group on its successful  sale to strategic buyer, Equian.

The Assist Group, based in Lakewood, ClinAssist^® claims review process identifies improper hospital costs, providing comprehensive data and significant savings to payers. As a leader in complex claims review and resolution, TAG offers payers a complete solution – from initial screening through final resolution. The comprehensive claims resolution service supports findings, allowing payers to avoid reimbursing facilities for inappropriate billed charges. Results have produced an unprecedented uphold rate for identified billing errors, saving payers virtually millions of dollars each year. Leveraging TAG's extensive claims compliance experience, it also offers a negotiated discount option that enables payers to retain their existing facility discount and realize additional significant pre-payment savings, while complying with the strictest of payment deadlines.

Indianapolis-headquartered Equian is a healthcare information services company focused on lowering the cost of care by eliminating waste through integrated payment integrity solutions.

Selling your company? How to prevent your sales transaction from falling apart

Selling your company? How to prevent your sales transaction from falling apart? 

Chances are, if you are a business owner, you have never tried to sell a business. Most business owners sell their business only once. However, those who are in the merger and acquisitions business know the answer to this question - everyone has had a transaction fall apart. Sometimes it's for good reason. But many times, a delayed, discounted, or dead transaction is very preventable with better seller preparation.

Has any of the following happened to your transactions?

1.        Unrealistic (or changing) seller expectations of valuation. Many times sellers do not have an understanding of how valuations are determined. Some look at sales of public companies many times larger than their company; others may receive information from a peer in a different industry; yet others look at revenue without consideration to EBITDA. A few are “sold” by representatives that promise them high valuations in order to secure their business. Going into a transaction with an unrealistic expectation of valuation is a recipe for disappointment, equivocation, and failure.

2.     Cold feet - Seller, especially business owner, is not emotionally prepared to sell. Having sold a number of businesses,    including being involved with six that I either started or ran, I understand how difficult a decision to sell can be. You’ve built this business, struggled and toiled alongside loyal employees, investors, and managers – spent more time on the business than with your family. And now, the decision to sell? Many business owners do not have a post-sale plan and can be very apprehensive about “what’s next?” It is not unusual for a business owner who is not emotionally prepared to sell, to change his or her mind in the middle – or towards the end – of the sales process, incurring significant costs, stress, and ill-will.

3.       Selling company's performance deteriorates during the sales process. Without a doubt, performance erosion during the sales process is the single greatest reason for price adjustments (discounts) or deals falling apart. As a CEO or business owner, selling your business is like adding another full-time job. First-time seller business owners always underestimate the time and energy required to both sell the business as well as maintain the performance “promised” to prospective buyers in your plan.

4.       "Stuff happens" - Surprises show up during due diligence. Many business owners have developed customer and supplier relationships on a handshake or fairly informally. While these relationships may have existed for years, you can’t sell a business without documentation. Sales and supplier contracts must be in place, Intellectual property protected, key employees retained, shareholder and legal entity information buttoned-up, etc. Surprises that show up during the process can cause – at best- large amounts of the seller proceeds to be placed in escrow. At worst, due diligence surprises result in price discounts, or in the buyer deciding to walk away.

5.       Failure to demonstrate a meaningful strategic growth opportunity to the buyer. Buyers are buying an opportunity to get a return on their investment. They are interested in the future, less about your past. You need to develop and paint a compelling story about the future. A thorough understanding of the opportunities, strategies, possible competitive responses, risks, actions, etc., provide a buyer with enthusiasm about the likelihood of a successful investment.

The business owner seller, while very knowledgeable about their business, has little experience in selling a business. As mentioned, for most sellers, it may occur only once in their lifetimes. As a result, they have a lack of understanding of roles, motives, and behavior of the parties involved with a transaction.

Seller's Advocate.  Mead Consulting performs a role with our clients - as the business owner seller's advocate. Our senior consultants have been through dozens and dozens of transactions as both buyers and sellers. We understand the stress involved for the seller. We help clients prepare for the process by working with them in advance to add value by increasing Revenue and EBITDA, strengthening management, working on pre-due diligence, and developing a compelling strategic growth story. Additionally, we walk the business owner through the process, educating them about various aspects of the transaction and the roles of the players, so that there are fewer surprises for them. We assist them in the selection of the appropriate team for their transaction - investment bankers, lawyers, accountants (especially tax). During the sales process we support the transaction team, leveraging the business owner's time, and making certain that key milestones and steps are completed. We keep the business owner and the management team focused on maintaining company performance. When unexpected issues arise during negotiations, we can be a trusted bridge with the business owners helping them see solutions rather than obstacles.

 Better advisors refer Mead Consulting to prospective sellers as a Seller's Advocate. The better lawyers, accountants, banks and investment banking professionals see the value that a Seller's Advocate can have to make certain that a deal does not fall apart and the seller maximizes value.

Since many business owners may be unfamiliar with a Seller’s Advocate…..See what Business owner sellers say about Mead Consulting in a Seller's Advocate role.

...We really underestimated what the sales process would be like. Mead Consulting worked with us to prepare the company, helped us with our planning and due diligence, management presentation, coached us with presenting, and helped us navigate throughout the process. ...Steve F, CEO, Financial Services Company

...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

...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

 ...Thank you to you and your team for helping us. You have that unique ability to challenge people without coming across as judgmental or critical, and you forced us to look at things differently. We would not have been able to get to the next level without your help...Mike M, President,  Business Services company

...I do not know why anyone would attempt to sell their business without Mead Consulting. 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. Making sure that it was the best deal for me. ...Ron T, CEO, Software Business

For more information on our experience and services, please contact Dave Mead at (303) 660-8135 or meaddp@meadconsultinggroup.com

The Mead Consulting Group helps business owners navigate through a successful sales process, including preparation, selection of the 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.