Business owners may have a desire to sell their company, but unfortunately their data may not be ready. Strategic acquirers and private equity firms are sophisticated buyers. Their due diligence process will be rigorous and data-driven. The following two issues threaten to de-rail any deal process and negatively impact valuation.
Poor Data Quality
Interested buyers expect to see that the company’s data supports the investment thesis and claims made by management. However, owner-managers have not always focused on the quality of their data:
- Information is siloed, captured inconsistently, or is improperly structured.
- Key insights are not tracked or lack the inputs to be calculated.
- Different views of revenue and profitability are unavailable, such as: by end customer, channel, product, market, industry, region or site.
- Operational metrics are missing, such as utilization or workforce efficiency.
- Quoting and pricing is inconsistent or lacks a logical approach.
If management struggles to respond to customary data requests, then the buyer’s view of the company and its assessment of the management team will be negatively impacted.
Lack of Confidence in the Forecast
Potential buyers will place intense scrutiny on the revenue forecast and the suitability of the underlying assumptions in your financial model.
Signs of a weak, unstructured sales funnel process and an aggressive forecast with unvalidated assumptions will trigger investor concerns.
If management is unable to support forecast assumptions, this will ultimately impact the attractiveness of the company. A potential buyer’s lack of confidence in the forecast often leads to deal re-pricing, negotiation of earn-outs, or a broken sale process.
Conclusion
Before embarking on a company sale process, we recommend reviewing your underlying base of data and sales forecast methodology to ensure they are “prepared” to pass a buyer’s detailed due diligence process.
We are experienced acquirors and know the exacting standards that buyers expect. Contact us to discuss how we can help with vendor data preparation to optimize the process of selling your company with our sales funnel automation, data analytics and financial modelling services.