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Monday, June 08, 2015

Achieving an Exceptional Multiple in the Sale of Your Company – Part 4 and Final


As mentioned a few times in previous blogs, when looking at whether or not you can realistically expect exceptional results you need to be honest with yourself.  Ask yourself these questions.  If you can truly say yes to all or most of them, then you do indeed have an opportunity for exceptional multiples.  If not, don’t worry, all is not lost; it just means that you need to have more realistic expectations.  Don’t forget 2-3X (traditionally licensed software) revenue is normal and 4-5X is a statistically superior outcome.  Most entrepreneurs would love to be in that situation.  But, if you do the work on the internal factors that you can control, your solution is validated by exceptional growth well in excess of the market, and you can answer these questions positively, then you have a shot at really making it big.  Ask yourself:

  • Am I truly at the “start” of a new trend? Or have I missed the initial rush to market and am now competing with many other look-a-like offerings in a rapidly maturing space?

Valuation-Drivers Bell Curve

  • Am I truly unique? Are my products one of a kind and differentiated with barriers to entry?  Do I have domain expertise that few people in the world have?
  • Is my domain truly socially, politically or economically disruptive to current market forces and able to impact key metrics such as time to market, cost, or other operation imperative? Am I truly creating a completely new market? Or am I really just an adaptation of an old market? Is my market of sufficient size to attract interest from major players?
  • Are there multiple companies NEEDING to compete in the market that absolutely NEED my solution and have the resources to compete for it? Remember this says “NEED,” not “want.” Need means essentially that they cannot compete in the market without it. Want is a nice to have, no matter how passionate the bidder may be.

If you can say yes to these questions, then you may indeed have earned the right to exceptional outcomes. For more information on this topic feel free to download our white paper on Achieving an Exceptional Multiple in the Sale of Your Company or drop me a line at boes@merger.com.

 

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