If you want to sell your business, read this: We’re going to tell you exactly what buyers look for in a business…

and what makes them pay top dollar.
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We’ve bought over 20 companies and we’ve sold a few of our own.

We know how both sides of the negotiating table look.

That gives us a unique perspective to explain why companies sell for a lot (or why they don’t). 

We’ve also bid against huge PE firms and know exactly what makes them pay more (and what makes them send in a lowball offer).

Below is a summary of the learnings from buying, selling, and bidding against PE firms, family offices, and strategic buyers.

If you want to sell your business for the absolute highest price possible, read this:

Buyers look for companies with FORM:

F - Financials

O - Owner-Independent

R - Repeatable 

M - Maximizing Profits

It’s an accomplishment to be a great business. But it’s an entirely different battle to demonstrate to potential buyers that your business is great.

That’s why we start with Financials.

They’ll answer two questions:

1. Does this business have strong economics? 
2. Is this business organized?

To be clear, we won’t pass on a business because the financials are messy. But we will offer less for a disorganized business.

Messy financials means we’re taking on more work (organizing the financials) and more risk (uncertainty about the financials = more risk in acquiring the business). 

Buyers will typically look at three years of financials. If you plan to sell in three years, you should be getting your financials ready now.

Use Quickbooks or a similar accounting software. Categorize every single transaction correctly (hire someone to help if you don’t know how). Hire an accountant to prepare monthly, quarterly, and annual financial statements for you. Save these financials for future use.

Owner-Independent

Can you take a two week vacation without answering your phone or checking your email?

That’s the ultimate test of an owner-independent business.

If your business can mostly run without you, we will pay more to acquire your company.

If your business entirely depends on your existence, buyers will be less interested in acquiring it.

Repeatable 

Where will your company’s next 100 customers come from?

When the owner’s no longer working his country club connections to bring in more business, will the company still grow?

If we can’t clearly see a sales & marketing engine that reliably brings in customers, we’ll be less interested in buying it.

Maximizing Profits

Buyers purchase companies on a multiple of earnings. Some use seller discretionary earnings (SDE) while others use earnings before interest, tax, depreciation, and amortization (EBITDA).

Either way, you need to maximize the amount of profit in your business.

Sounds obvious, but many business owners don’t do this. Instead, they:

• Run personal expenses through the business
• Keep non-productive family members on payroll
• Spend on unnecessary expenses 

You can’t count on a buyer adding back those expenses. Many won’t.

We certainly scrutinize every expense closely. If you don’t want to get dinged on your purchase price for an expense, the only sure-fire way is to keep it off the income statement entirely.

Ruthlessly cut expenses and only spend a dollar when it comes back as more than a dollar in profit. 

You need to have the best 3 years possible in terms of profit leading up to the sale.

Now you know FORM and can start getting your business ready for a sale.

Every potential buyer will have their own list of specific criteria they look for, but the above items are universal. 

Here’s a non-comprehensive list of everything that will make your business seem more valuable to a buyer:

• 50%+ gross margins
• 20%+ operating margins
• Competitive advantage that would take years and lots of $$ to replicate
• Positive revenue and profit growth year-over-year
• Recurring revenue
• Predictable revenue growth
• Reliable and timely cash flows
• Scalable (gross margin % increases as revenue increases)
• Low customer acquisition cost relative to lifetime value (LTV)
• Operating in a growing market
• Strong, capable team…
• …but the business doesn’t rely heavily on one or two key people
• Business doesn’t rely on the founder
• Standard Operating Procedures (SOPs) written out for every process
• Central database with all customer information stored
• You can raise prices easily if your supply or labor costs go up
• Financial statements for last 3 years (ideally audited)
• Long-term contracts with clients (if applicable)
• Company owns its intellectual property

Enduring Ventures is a Buy & Build firm. Which means we don’t follow this checklist. 

We’re perfectly happy to get into a difficult situation and help solve it with our team. Most of those situations don’t check all the boxes above. But if you’re a seller looking to get a maximum price from a buyer, you want to check as many of the boxes above as possible.

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