6.EFFECTIVE USE OF PROFESSIONALS – Reviewed or audited financials by a reputable CPA firm are quite valuable in eyes of a buyer. Professional financials cast a positive halo on your approach to controlling your business while at same time reduce buyer’s perception of risk. Bring a good outside attorney into mix, and risk drops even more. The thought process is that this attorney has been giving his client good advice for years on protecting company from litigation. A strong professional team is a great asset in growing your business and in helping you obtain maximum value when you exit.

7.PROCUCT/SALES PIPELINE – Large pharmaceutical companies are well known for buying smaller pharmaceutical companies that have a robust product pipeline for very generous prices. Smaller companies often are more agile and have better R&D efficiency than their high overhead big brothers. In technology, time to market is critical and big companies are constantly evaluating build versus buy question. Small companies that develop a hot new technology are faced with decision of developing distribution internally or selling to a larger company with developed channels. A win/win scenario is to sell out at a price, in cash and stock at closing, that rewards smaller company for what they have today, plus an earn out component tied to product revenues with new company. The same earn out philosophy can be employed for a selling company that has a large sales pipeline. The acquirer is not anxious to pay for that pipeline at closing and seller wants to delay his company’s sale until next big deal. An intelligently structured sales contract with a contingent payment based on closing accounts in pipeline is a great solution.

8.PRODUCT DIVERSITY – A smaller company that has a quality portfolio of products but may lack distribution can become a valuable asset in hands of strategic buyer. A narrow product set, however, increases risk and drives down value. If you are planning to exit, review your product portfolio. Are there obvious gaps that could be filled quickly? How about buying a small company with a few complementary products? What about buying a product line from a company? Can you lock up distribution rights for North America for best product from a Finnish manufacturer? Have your customers been asking you to develop a new product? Spread out your product risk as a value enhancing strategy.

9.INDUSTRY EXPERTISE AND EXPOSURE – This activity is often overlooked because it is difficult to measure its direct returns. We find that it is a value driver when it is time to sell business. To extent possible, encourage your staff to publish articles in industry magazines and newsletters. Get exposure as a presenter at industry events. Encourage local and industry reporters to use you as voice of authority with industry issues. Your company is viewed in a more positive light, you may get more business referrals, and a buyer from your industry will remember you favorably and is more likely to consider you as an acquisition candidate.

10.WRITTEN GROWTH PLAN – If I could get you to do one thing that will cost you nothing but brain power and your time it would be to capture opportunities available to your company in a two to five page written growth plan. Even if you are putting your company on market tomorrow, it is not too late to identify all opportunities your company has created. For any company, in any stage, this is a valuable living document to guide you strategically. Small companies with limited staff are forced to put out fires and live tactically. A growth plan helps create a process that will allow you to break big strategic plans into executable tactical activities. What additional markets could we pursue? What additional products could we deliver to our same customers? What segments of my current market offer most growth potential? Where are best margins in our customer set and product set? Can we expand in those areas? Can we repurpose our products for different markets? Are we getting best return on our intellectual property? Can we license our technology? Do strategic alliances or cross marketing agreements make sense? Capturing this on paper as part of your exit plan will increase likelihood that an acquiring company will view you more as a strategic acquisition. It demonstrates that you have identified a path for growth and it may identify opportunities that buyer had not considered. Those opportunities can add to purchase price.

The bottom line when it comes to unlocking market value of your privately held company is not limited to bottom line. Profitability is hugely important, but factors above can result in significant premiums over traditional valuation approaches. When one buys or sells Microsoft stock, there is no room for interpretation about market price. The market for privately held businesses is imprecise and illiquid. There is plenty of room for interpretation and result for best interpretation by marketplace is a big pay off when you decide to sell.