Mergers & acquisitions advisors love to work with clients who have already done their homework about valuation. When owners have taken the time to look at their businesses objectively and made changes that resulted in less owner dependence, that makes those businesses far more attractive to buyers and much more salable.
Max Friar has worked with Vincent Mastrovito of Prometis Partners for several years now with the goal of educating business owners about how to increase the value of their companies. It’s Calder Capital’s job to sell businesses. Vincent helps owners prepare their businesses and themselves for a future sale. We asked Vincent some questions about what what he does as a exit planner and what he recommends owners do before they decide to sell.
What is your professional background and how does it help you prepare business owners for exit planning?
My professional background has been in the financial services industry for over 30 years. My clients were business owners.
The experience I gained in the financial services industry has helped me to better understand how important their businesses are to owners for sustaining their retirement. It also helped me to understand the dynamics of the family and how that plays a huge role in the decisions owners make.
How does what you do intersect with what Calder Capital does as business brokers in West Michigan?
We assist Calder Capital by preparing the business for sale and make sure it is attractive and transferable to a new owner.
What options do business owners have in terms of selling or otherwise transitioning their businesses?
Business owners can have several options for transitioning or selling, if they plan for it. A business needs to have two key elements to it. First, it needs to be attractive to a new owner. Secondly, it must be able to be transferred to a new owner and survived and thrive under the new owner’s leadership.
For example, if a client’s children are looking to take over a business but the owner has done no mentoring, realistically how can the business be transferred? How will it succeed? How will the employees and vendors react to the new owners? How will they can handle the pressure when things go bad for a time? And, practically speaking, if the cash flows from the business are paying the owner and the kids feel they can’t get ahead, they might just as well go get jobs somewhere else with less risk.
What exactly do you do for your clients to help them in transitioning their businesses?
I give them clarity on where they are now and what steps they need to take in order to successfully sell or transition the business.
What is the biggest challenge you see business owners dealing with in terms of getting their businesses ready for sale?
Owners’ expectations of the time it takes to truly prepare their business for a transaction. Additionally, business owners will always think their business has more value than it may actually have. What they are overlooking is that most business are very dependent on the owner, and a new owner will see that risk and offer less than what the seller is asking.
If you had one piece of advice to give for business owners who are thinking about maybe someday selling their businesses, what would it be?
Keep an open mind and plan as far ahead as you can.
Calder Capital recommends Prometis Partners to clients who are beginning the process of planning for retirement. If you as an owner have questions about how much your business is worth and want to work with an exit planner to strengthen areas of weakness and add value to your business, Vincent Mastrovito is an excellent resource.