Valuation and exit readiness
Much of the value in a founder-owned company is not visible to the buyer underwriting it. Wild Rose Advisors values the company in writing, and the readiness work seeks to make that value visible before a sale.
The valuation
Every engagement begins with a written assessment: an estimated range of value grounded in current published transaction data for the sector, with its assumptions stated, the buyers active in the sector and how each is likely to view the company, and the actions that would move the figure.
It is directional rather than a formal appraisal, provided in confidence and at no cost, and requires no agreement. Many owners go no further for some years; knowing the figure changes how a company is run whether or not a sale follows.
The Assessment Covers
- An estimated range of value, with the assumptions stated
- The strategic acquirers, private equity and private investors active in the sector
- How a buyer is likely to see the company from the outside
- The actions that would move the figure, in order
Four priorities, in order
The readiness work addresses what a buyer prices, in the order it typically matters.
- 01
Recurring Base
Which work is contracted, at what frequency and price, and renewing at what rate. A company that can show this in a schedule typically receives credit for it.
- 02
Concentration
The share of revenue held by the largest customers. Concentration takes time to remedy and little time for a buyer to identify.
- 03
Operations
Moving the business out of the owner's head and into written procedures: how work is scheduled, performed, checked and billed.
- 04
Market Presence
A company that can be found and verified. Usually the least expensive of the four, and the most often neglected.
Standard operating procedures
In many founder-owned companies, the operating manual is the owner: how jobs are quoted, which technician takes which call, when a deficiency becomes a repair order, who calls a customer whose renewal has lapsed. A buyer prices that as risk.
The Value Builder System reports, from its published analysis of the businesses that have completed its assessment, that companies able to operate without their owner were valued materially higher than those in which every decision routes through the person selling.
Source: The Value Builder System, published analysis of completed assessments. Their reported averages across industries, not a valuation of any company.
Wild Rose Advisors offers process documentation as a defined part of the readiness work. The firm interviews the owner and key members of the team individually, one process at a time, and audits how the work is performed in practice rather than how a dated manual describes it. The result is a set of procedures from which a new owner could run the business, and which a buyer can read in diligence as evidence that the business is a system rather than a personality. Nothing in the work requires disclosing that a sale is under consideration.
A verifiable market presence
Independent service companies are, as a rule, difficult to find and verify online. The company loses inbound work it never learns of, and a buyer reviewing a company whose customers all arrived through the owner's personal relationships sees key-person risk. In sectors where the typical competitor is hard to find, a basic presence can be a durable advantage.
Engagement structure
The same program at two levels of involvement, depending on how much of the work the owner's team can carry. In the Guided engagement the firm diagnoses, prioritizes and directs, and the owner's team executes, with monthly working sessions and a prioritized list held to account. In the Done with you engagement the firm also carries the substantive work: the operating manual built from interviews, the recurring revenue documentation, and the data room assembled before any buyer requests it.
Each is scoped in the first working session and may be concluded at any time. What is paid is credited against the firm's success fee if the firm later conducts the sale, which is a separate engagement under a separate agreement. Where the firm judges the work not worth undertaking, it says so; some companies should go to market as they are.
When this engagement is not appropriate
- You intend to sell this quarter. There is insufficient time for any of the work to be reflected in the financials.
- You have no intention of selling and the business operates well. In that case this is discretionary expenditure, and it should be evaluated as such.
- A serious offer has already been received. The offer should be evaluated first.
A written valuation, in confidence and at no cost, is the first step.
Request a Valuation