On the recommendation of my friend Nick Strong I attended a seminar yesterday in London organised by BCMS Corporate about “Selling Your Business for the Maximum Value”. I hasten to add ,this is not because I am planning to sell my business but to find out what BCMS had to say on behalf on my clients!
BCMS stated that on average they are able to obtain a final value of 2.5 times the lowest offer received.
There were 2 key things which really stood out to me.
1 What could the buyer do with your business?
I think it was Steve Jobs who said that, when it comes to a new gadget, a baby boomer will typically as “What is it?” whereas their child would be more likely to ask “What can I do with it?”. This came to mind when the speakers talked about the value of a business. They argued that traditional valuation models place too much emphasis on past performance. The value of a business depends on what the buyer will be able to do with it. For this reason, premium valuations are more likely to be obtained when selling to someone entering the market from overseas or a business providing complimentary goods/services as opposed a competitor. Just as features are more important than benefits, the future is more important than the past.
This made me think of the stock market. The price of a quoted share is determined by sentiment about the future prospects of the company more than the past performance.
2 Establishing choice of buyers
It was emphasised many times yesterday that at all stages the seller must ensure they have a choice of potential buyers. For BCMS this means approaching an average of 240 potential buyers at the beginning right through to keeping in dialogue with those unsuccessful at the final stage . To burn your bridges to early is very dangerous and gives the buyer the upper hand.
I must say I was very impressed with BCMS, the presenters and the approach that they advocated. I would recommend anyone thinking of selling their business to attend a BCMS seminar.
Nice summary Simon. I’m pleased that you found the time useful. How will the information you gained from the day affect the valuation advice you give your clients?
Well it’s not that they gave a new formula , but a different approach. In cliches I would say
Throw the net wide
Don’t burn your bridges
Look forward not back
I am having a follow up call tommorrow with BCMS to see how they work with accountants
The follow up call sounds interesting and I am very interested to hear how that goes. I guess the advise on valuation comes down to approach then. Standard valuation being multiples of historic profit and the BCMS approach which is create a maker for buyers of your business and most of all make the benefits of buying obvious on the buyer’s terms of interest. Either way it all boils down to what someone will pay for the benefits THEY perceive. I’m interested to hear more