You’ve been working hard and smart for five plus years, building your managed care company from a small niche player in a couple of states to a national company with an impressive client list. After all that work, the angel investors are looking to cash in on their investment and you’d like to take a few dollars off the table as well.
Before contacting potential buyers, there are a few things to consider. First, find an investment banker that knows your general business and marketplace. This will speed things up dramatically, reduce the amount of time you have to spend educating, and reduce the likelihood of mistakes due to misunderstanding or misinterpretation. It will also make for a fair and reasonable valuation – one that, in all likelihood, will be less than you think your company is worth.
Second, be brutally honest. Don’t claim your company has customers and/or revenue it doesn’t. Obvious, I know, but rare nonetheless. Potential investors are quite used to exaggerated promises and inflated numbers; surprise them with your honesty and they will be
much more comfortable.
Third, don’t dramatically change your staffing, pricing, or sales process in an effort to ‘clean up’ the company unless you have at least a year before you go to market. These changes are obvious; they serve as a flashing red light warning investors that the business they are looking at today is (perhaps) significantly different from the business that grew so successfully. If the model and processes worked before, don’t change them just to look good for a sale.
Unless, of course, something bad is happening in the market and you are just trying to get out from under before the roof caves in.
Finally, don’t think that just because the bankers on the other side of the table aren’t expert in your space that they won’t learn everything there is to know about your company, your business model and operations, customers, competitors, regulatory landscape, and potential issues over the horizon. They may not be experts, but they can, and will, find experts who know the space, your customers, and the market as least as well as you do.
Done right, the process although time consuming and occasionally maddening, will result in a big payoff and a stronger company. Handled poorly, it will degenerate into an endless back and forth that may well result in a withdrawal of an offer.
Mar
13
