In my two decades of M&A experience, I’ve seen countless business owners make the same mistake: waiting until they’re ready to sell before thinking about value creation. Let me be blunt – if you’re not actively building value years before your exit, you’re leaving money on the table. And nobody likes leaving money on the table.
The Hard Truth About Business Value
Here’s something that might sting: your business probably isn’t worth what you think it is. Trust me, I’ve had this conversation hundreds of times. But don’t worry – we can fix that.
Why Buyers Aren’t Impressed with Your “Potential”
Every owner loves to talk about their business’s potential. But let me tell you what buyers actually hear when you say “potential” – they hear “not yet realized.” And guess what? They’re not paying premium multiples for your dreams.
Understanding Your Real Value Drivers
The Numbers Don’t Lie
Your EBITDA matters, obviously. But if you think that’s all buyers care about, you haven’t been paying attention. Modern buyers are sophisticated – they’re looking at:
- Customer concentration (please tell me you’re not dependent on two clients)
- Working capital efficiency (your inventory isn’t aging like fine wine)
- Revenue predictability (because “lumpy” revenue is about as attractive as it sounds)
The Systems Behind the Numbers
If your business runs entirely through your smartphone, we need to talk. Seriously. Professional buyers want systems, not superheroes.
Operational Excellence: Stop Being the Hero
The Owner Trap
You know what kills deals faster than poor financials? An owner who’s too essential. If you’re still the chief everything officer, you’re not building value – you’re creating a job with a fancy title.
Breaking Free
Start documenting processes now. Yes, right now. Stop reading this article and write down one thing only you know how to do. I’ll wait.
The Market Position Reality Check
Your Competitive Advantage
If your competitive advantage is “great service,” I have some bad news for you. That’s not a competitive advantage – that’s a basic requirement. Let’s dig deeper.
Finding Your Real Edge
Look for advantages that are:
- Actually defensible (patents are nice)
- Measurable (feelings don’t count)
- Sustainable (without you being there)
The People Factor
Your Team Matters More Than You Think
A strong management team isn’t a luxury – it’s a necessity. And no, your cousin who helps with bookkeeping doesn’t count as a CFO.
Risk Mitigation: The Unsexy Side of Value
This is the part everyone skips, but it’s often where the real value lives. Think of it like insurance – boring until you need it, then it’s the most important thing in the world.
Common Risk Blind Spots
- Undocumented IP
- Verbal agreements with key customers
- That compliance issue you’ve been “meaning to fix”
The Timeline Truth
Starting Early
Three years minimum. Five years is better. If you’re thinking “but I want to sell next year,” well, I can’t help you build a time machine.
Getting Started Today
Look, building value isn’t complicated, but it is hard work. Start with these steps:
- Document one critical process
- Identify your riskiest customer concentration
- List three ways to make yourself less essential
- Schedule a real vacation (if your business breaks, you know where the problems are)
Final Thoughts
The best time to start building value was five years ago. The second best time is now. And if you think this all sounds like too much work, maybe you should keep your business – because selling it might be even harder. And that’s how the M&A advisor takes her fee.
Remember: The goal isn’t just to make your business look good on paper. It’s to create genuine, sustainable value that survives due diligence and attracts premium valuations. Because at the end of the day, that’s what puts more money in your pocket.
And isn’t that why we’re all here?
