4 Principles to Sell Your Business From Steve Little, the Mergers and Acquisitions Master Who Always Gets More
If you own a business that produces between $5 million and $100 million every year, what is your business worth? What’s your exit strategy, and how much money do you want to walk away with? What’s your ultimate dream come true? What do you want to do once you buy all the toys you’ve ever wanted (the cars, the beach house, the exotic trips, and so on)?
What kind of impact do you want to have?
According to Pitchbook, in 2019, 11,304 business sales were made valued at over $2 trillion in North America, and approximately 64% of those deals were under $100 million.
Globally, the IMAA Institute tracked 48,849 deals valued at $3.8 trillion USD in 2019. (For context, that’s more the GDP of India, the fifth-largest economy in the world.)
I recently interviewed Steve Little, a unique mergers and acquisitions expert who’s done over 400 deals over his 40-year career and is known by his clients for “always getting more.” You might recognize him from transactions he’s completed with IBM, Seagate or Redfly, or from speaking engagements with business leaders at EO, Cadre or MMT.
He started his technology career working directly with Jack Welch at GE as an operating systems performance modeling specialist. That’s a fancy way of saying a mathematician who simulated operating systems to increase productivity and profit.
Now he uses that superpower to increase the value of the businesses he sells. One of Little’s big principles is “Businesses are sold, not bought.” What does that mean exactly, and why is it so important to you and your business?
The best way to illustrate this principle is with a story:
"Before he died, a father said to his son; “Here is a watch that your grandfather gave me. It is almost 200 years old. Before I give it to you, go to the jewelry store downtown. Tell them that I want to sell it, and see how much they offer you."
The son went to the jewelry store, came back to his father, and said, "They offered me $150 because it's so old."
The father said, “Go to the pawnshop and ask them."
The son went to the pawnshop, came back to his father, and said, "The pawnshop offered $10 because it looks so worn."
The father asked his son to go to the museum and show them the watch.
He went to the museum, came back, and said to his father, “The curator offered $500,000 for this very rare piece to be included in their precious antique collections."
The father said, “I wanted to let you know that the right place values you in the right way. Don't find yourself in the wrong place and get angry if you are not valued. Those that know your value are those who appreciate you. Don't stay in a place where nobody sees your value."
Know your worth.
The moral of the story is that the right people will value you for who you are and what you have. Don't spend time with people who don't value you. Find the ones that do.
One of the reasons Little’s past clients consistently say that he’s “the guy who gets more” is because of his industry longevity. He has a massive Rolodex and system that consistently produces results, informed by a list of 24 Value Drivers and four Key Principles.
The Value Drivers are critical areas of focus Little uses to increase the value of a business in 6-18 months. The Four Key Principles are disciplined rules and mindsets every business owner needs to consistently produce predictable results that lead to a business sale.
There's always a risk-value equation. The higher the risk of ownership, the lower the value of the company; the lower the risk of ownership, the higher the value of the company. Anything you do that reduces risk increases value.
Valuation does not equal transaction value. All business owners are operating on the understanding that a valuation represents the actual value of their business. It's not -- and it's essential to understand the difference between your business’ valuation and the transaction value of your company. The transaction value is what the right buyer will pay for the business at the right time. If it were just revenue and earnings, you couldn't explain companies like Snapchat, Twitter, and so many other startups with limited or no revenue and earnings that are worth billions.
Businesses are sold, not bought. For every business, at any time, there are multiple potential buyers. Each buyer will value your business uniquely. It's usually based on a factor that's related to how much more valuable their business will be after acquiring your business. It's important to understand what they value most so that you're positioned properly, as the watch story reinforces.
The exit strategy is not about the exit, it’s about the strategy. You can't possibly know what your business is worth or where you're going to invest your time and money to make it worth more if you don't know who would buy you, why they would buy you, and what they value most.
These Four Principles are guiding concepts for you to build a business of great value.
Little adds that at the end of the day, selling a business is just like selling anything else. It really comes down to something quite simple: people talking to people.
When he gets started with a new client, he wants to understand the person: their aspirations, what they want to accomplish in life, their intentions, their goals, and their objectives. What’s going to make them happy? He then works to design a strategy or plan that delivers that to them. After his initial evaluation, Little comes back with a series of strategies that can be applied to elevate the value of the business and get the most money in the shortest period of time while also creating a legendary impact.
To learn more about selling your business for more, working with Steve Little and the Value Driver Video and “Valuation Growth Playbook” that explain Little’s “24 Value Drivers” mentioned in the interview, visit www.ZeroLimitsVentures.com/Free
Watch the whole video interview here: www.MrBz.com/SteveLittleSite