Positioning
Enhancing and protecting value: Positioning your business to attract the best multiple
Perception is everything
Whilst no two businesses are the same, certain factors will universally boost buyer confidence. These factors enhance the attractiveness of your business which in turn makes you a premium asset and drives a higher valuation. Below are some of the key considerations to better position your business for a successful deal.
Capturing the attention and imagination of buyers is key when you want to sell your business. It’s all about storytelling and creating a compelling narrative, making sure you highlight your unique strengths and growth potential.
JAMES WILD
Head of M&A
A strong revenue model
Your revenue model reflects where your business sits in the market. It’s therefore important that it supports the narrative you want to communicate to any buyer. A well-defined, consistent and transparent revenue model helps buyers to understand your business and builds trust. Businesses which can demonstrate visibility of future revenues provide comfort over the forecasts and in turn confidence in the equity (or growth) story.
Key value considerations include:
- Revenue certainty: what is recurring versus repeat versus one off income, and is it contractually underpinned?
- Scalability: what is your addressable market and potential for growth?
- Track record: does your past performance support your forecast, or contradict it?
Building an economic moat
Whether it’s through your reputation, intellectual property, innovation, technology, or know-how, a defensible market position is crucial as it demonstrates a competitive advantage that sets your company apart. This unique position makes it difficult for others to replicate or challenge your market share, which supports longevity. This often translates to a higher valuation, as buyers are willing to pay a premium for businesses with a proven track record of market leadership.
A sustainable competitive advantage helps to create a defensible market position.
Identifying your addressable market
Presenting a clearly defined market with significant scale drives value for two main reasons. Firstly, demonstrating that you know your market and how to target them provides comfort that you can effectively position your business against competitors, reducing the perceived risk in your projections. Secondly, a large addressable market supports the growth potential of your business, which provides assurance in the ability to deliver your forecast. Both these factors help buyers to pay a higher price.
Enhancing business stability
Risk essentially means uncertainty. The more risks a buyer perceives within your business, the more they will use the price and structure of a deal to reduce that uncertainty to an acceptable level. Risks can arise from many different areas – concentration within your client base, reliance on a particular supplier or territory, regulatory or technological changes, gaps in your governance processes, dependence on key people or clauses in contractual terms. Assessing your business and proactively managing risk not only removes the scope for buyers to use these issues as part of their negotiation, but demonstrates that the business is well-run. This builds confidence in the company’s long-term success.
Assessing and managing your risks enhances business stability.
How we can help
There are many factors that impact how a business is perceived and the multiples it will attract. Knowing what you want from a transaction and understanding the factors that impact what your business is worth, is key to getting the positioning right.
We have successfully advised hundreds of businesses in their sale preparation and guided them through the process to maximise value. If you would like to discuss your options and how to position your business, please get in touch.
