Words Matter: Positioning Your Business to the Market
You’d been thinking about selling your business for a couple of years before you told anyone. Then finally the topic came up as you were playing the back nine with a friend one summer afternoon. It was the first time you’d expressed it publicly. It felt strange to audibly hear the idea of selling your company out loud.
As fortune would have it, you mentioned it to a knowledgeable friend who suggested you find an exit planner to assist with exploring such a life-altering move. You were not so sure at first, but your friend assured you that a trusted guide through the process would be worth every penny.
In your first meeting, you started to get a taste of the “root canal” that selling would be for you. One area that you’d never thought about in thirty years of running your company related to a conversation around nuanced vocabulary.
You’ve heard it said that “words matter”. As a business owner, you might be surprised about how something as simple as words can attract or repel potential buyers for your business, even if your numbers should speak for themselves.
Using Industry to Attract
As is the case with designers and fashion, investor tastes for particular industries change over time. When you go to sell your business, it is important to engage knowledgeable advisers who are in tune with investor trends.
A general theme that tends to stand the test of time is the appeal of high-tech. Even in so-called “rust belt” industries, the more high-tech the better. This brings to mind the famous line from The Graduate, “Plastics!” At that time, plastics were high-tech.
Consider a Couple of More Modern Examples:
First, consider positioning an auto supplier as an automation business. Automation drives the competitiveness of manufacturing processes and placing your business in this industry may entice interest from investors that only invest in high-tech manufacturing. Using the less techy term “auto supplier” is vague enough that it might fail to attract interest from the most qualified buyers.
Second, consider positioning a professional services business as a subscription software business. Oftentimes, professional service firms license proprietary software to clients. In today’s world (2021), if software licensing is a meaningful part of your business, you could benefit from positioning your company to investors as a software business with a services component, rather than vice versa. Similar to the above example, this will attract different investors who very well may pay you more for your business.
Being Ready to Defend Your Classification
While language is important, we still have to make sure we can back it up with documentation. Your assertions need to withstand investor scrutiny, or they’ll ultimately see through an attempt to present your business as something it’s not.
If you say you’re an automation company, your equipment list had better include some robots and your plant tour should include processes running with limited or no human intervention. If you say you’re a subscription software company, you should be able to demo your software and document recurring software revenue. In the end, we might not fully convince investors to view the company the way we want, but we are more likely to receive a higher valuation by presenting the business in a more investor-enticing manner.
If you are thinking about selling your business, and haven’t considered working with an exit planner to think through the process, reach out. We specialize in helping owners exit their business on their terms, with confidence and ease.
Recommended Read: Preparing Your Business For Exit is Just Good Business Strategy
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