The process of selling a company often focuses on historical financial results, but exceptional valuations generally flow to sellers with a clear and compelling vision of their company's future growth.
When I represent an entrepreneur or shareholder group in the sale, my job as an investment banker is to get the best possible deal for my clients. "Best" doesn't always mean the highest number, but whether it's raw purchase price or extremely favorable terms, the formula for maximum results for the company owner is the same.
Simply put: A buyer who fully believes in the story you are telling about the future will offer you more money, cut you slack at the negotiating table and be less likely to walk away if the transaction hits a pothole.
Your vision for the future must be built on a solid foundation. You can't have a five-year historical growth rate of 10% a year and expect a prospective acquirer to believe that you're suddenly going to jump to 50% annual growth for the next five years.
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Big valuations require analytically sound growth stories. Growth stories are built primarily on additional revenues, and additional revenues need to be broken down for easy analysis by the prospective buyer.
"Organic growth," which is revenue and profit growth coming from operations of the company itself, is most highly valued by potential acquirers. "Inorganic growth," which is generally defined as growth through acquisition or merger, is good too, but not in and of itself usually capable of generating outsize valuations. Knowing that there are lots of acquisition targets that could be layered under the brilliance of your high organic-growth management team, however, could get many buyers even more lathered up for big prices.