[Im_Talking]

I don't know what this article was trying to convey.

Valuations are a subjective airy-fairy number and, in reality, based on the strategic need of a buying entity. For example, when I was in the process of selling my last business I had 3 offers. 2 offers were from companies that wanted me obviously but didn't need me strategically, therefore their valuations were low. The 3rd offer was from a company who had a hole in their product-line and my tools fit perfectly in that hole, hence their perception of my company's value was much higher.

So find businesses which have a strategic need (or convince them of such need). Also, I would assume but have no evidence that strategic acquisitions have a higher success ratio than purely financial acquisitions.

And just like salespeople should 'always be closing', business owners should 'always be exiting'.

[namenotrequired]

> And just like salespeople should 'always be closing', business owners should 'always be exiting'.

That's interesting, could you expand on that a bit? Do you mean you should always have a few good exit scenarios prepared (e.g. keep a few potential acquirers interested) in case you need one?

[Im_Talking]

Sure. A business should always be prepared for outside interest meaning that you should have up-to-date financials that you can give-out anytime which show the summary information and overall financial trend, have no unusual liabilities like a unpaid tax liability, systems in-place to automate business functions (so a potential acquirer can see an efficient organisation), all employees/customers on some kind-of contract, no IP issues (all B2B relationships under contract).

So any business with interest can spend a minimal time in due-diligence and see an efficient, professional organisation with no skeletons.

At the same time, the goal of business is to exit, either via a buyout, or IPO, or whatever. No one wants to own a business that is unattractive for acquisition or investment, since these businesses just fade-away over time.

So the directors need to continually look for potential strategic relationships; a) because these are obviously potential customers, and b) because they are potential acquirers who will pay top-dollar for your business. This means that they will forget any standard valuation formulas ('X' x sales, 'Y' x EBITDA, whatever) and look at their overall strategic need for what your business will bring to them. And, most importantly, you need to communicate with them on this strategic level... so you need to do your research and keep your ears open to understand their pain points, and strategic needs.

By keeping your house in order, looking at the strategic level, and trying to elicit the interest of those businesses who 'need' you, you may get yourself in the perfect situations where you have competing bids, or the interested parties start to think (with your gentle prodding, of course) of the pain if you were bought-out by their competitor, etc. These are the ideal situations. But they don't happen by themselves, hence my line: always be exiting.

[namenotrequired]

Thanks a lot, this is very insightful!