Friday, November 18, 2016

Essential Reading For Tech Company Entrepreneurs 20 Books that Will Change How You Look at Your Business


Creating a great technology company involves much more than building a great product or service. Much of your success will depend on your business model, influencing customers, overcoming obstacles, employing social media, scaling, leveraging a worldwide workforce, and much more. This curated reading list consists of books we have recommended to clients and ones clients have recommended to us. They will inform, energize and inspire you while improving the odds of you building a successful company. 





Crossing the Chasm, 3rd Edition: Marketing and Selling Disruptive Products to Mainstream Customers
The bible for bringing cutting-edge products to larger markets--now revised and updated with new insights into the realities of high-tech marketing. In Crossing the Chasm, Geoffrey A. Moore shows that in the Technology Adoption Life Cycle--which begins with innovators and moves to early adopters, early majority, late majority, and laggards--there is a vast chasm between the early adopters and the early majority. While early adopters are willing to sacrifice for the advantage of being first, the early majority waits until they know that the technology actually offers improvements in productivity. The challenge for innovators and marketers is to narrow this chasm and ultimately accelerate adoption across every segment. 

Blue Ocean Strategy, Expanded Edition: How to Create Uncontested Market Space and Make the Competition Irrelevant 
The global phenomenon that has sold 3.5 million copies, is published in a record-breaking 43 languages and is a bestseller across five continents—now updated and expanded with new content. This global bestseller, embraced by organizations and industries worldwide, challenges everything you thought you knew about the requirements for strategic success. Now updated with fresh content from the authors, Blue Ocean Strategy argues that cutthroat competition results in nothing but a bloody red ocean of rivals fighting over a shrinking profit pool. Based on a study of 150 strategic moves (spanning more than 100 years across 30 industries), the authors argue that lasting success comes not from battling competitors but from creating “blue oceans”—untapped new market spaces ripe for growth.

Blue Ocean Strategy presents a systematic approach to making the competition irrelevant and outlines principles and tools any organization can use to create and capture their own blue oceans.

David and Goliath: Underdogs, Misfits, and the Art of Battling Giants 
Malcolm Gladwell, the #1 bestselling author of The Tipping Point, Blink, Outliers, and What the Dog Saw, offers his most provocative---and dazzling---book yet.

Three thousand years ago on a battlefield in ancient Palestine, a shepherd boy felled a mighty warrior with nothing more than a stone and a sling, and ever since then the names of David and Goliath have stood for battles between underdogs and giants. David's victory was improbable and miraculous. He shouldn't have won. Or should he have?

In David and Goliath, Malcolm Gladwell challenges how we think about obstacles and disadvantages, offering a new interpretation of what it means to be discriminated against, or cope with a disability, or lose a parent, or attend a mediocre school, or suffer from any number of other apparent setbacks.

Gladwell begins with the real story of what happened between the giant and the shepherd boy those many years ago. From there, David and Goliath examines Northern Ireland's Troubles, the minds of cancer researchers and civil rights leaders, murder and the high costs of revenge, and the dynamics of successful and unsuccessful classrooms---all to demonstrate how much of what is beautiful and important in the world arises from what looks like suffering and adversity.

In the tradition of Gladwell's previous bestsellers---The Tipping Point, Blink, Outliers and What the Dog Saw---David and Goliath draws upon history, psychology, and powerful storytelling to reshape the way we think of the world around us.

Abundance: The Future Is Better Than You Think  Providing abundance is humanity’s grandest challenge—this is a book about how we rise to meet it. 
We will soon be able to meet and exceed the basic needs of every man, woman and child on the planet. Abundance for all is within our grasp. This bold, contrarian view, backed up by exhaustive research, introduces our near-term future, where exponentially growing technologies and three other powerful forces are conspiring to better the lives of billions. An antidote to pessimism by tech entrepreneur turned philanthropist, Peter H. Diamandis and award-winning science writer Steven Kotler.

Since the dawn of humanity, a privileged few have lived in stark contrast to the hardscrabble majority. Conventional wisdom says this gap cannot be closed. But it is closing—fast. The authors document how four forces—exponential technologies, the DIY innovator, the Technophilanthropist, and the Rising Billion—are conspiring to solve our biggest problems. Abundance establishes hard targets for change and lays out a strategic roadmap for governments, industry and entrepreneurs, giving us plenty of reason for optimism.

Examining human need by category—water, food, energy, healthcare, education, freedom—Diamandis and Kotler introduce dozens of innovators making great strides in each area: Larry Page, Steven Hawking, Dean Kamen, Daniel Kahneman, Elon Musk, Bill Joy.

Platform Revolution: How Networked Markets Are Transforming the Economy--and How to Make Them Work for You 
A practical guide to the new economy that is transforming the way we live, work, and play.
Uber. Airbnb. Amazon. Apple. PayPal. All of these companies disrupted their markets when they launched. Today they are industry leaders. What’s the secret to their success?
These cutting-edge businesses are built on platforms: two-sided markets that are revolutionizing the way we do business. Written by three of the most sought-after experts on platform businesses, Platform Revolution is the first authoritative, fact-based book on platform models. Whether platforms are connecting sellers and buyers, hosts and visitors, or drivers with people who need a ride, Geoffrey G. Parker, Marshall W. Van Alstyne, and Sangeet Paul Choudary reveal the what, how, and why of this revolution and provide the first “owner’s manual” for creating a successful platform business.

Platform Revolution teaches newcomers how to start and run a successful platform business, explaining ways to identify prime markets and monetize networks. Addressing current business leaders, the authors reveal strategies behind some of today’s up-and-coming platforms, such as Tinder and SkillShare, and explain how traditional companies can adapt in a changing marketplace. The authors also cover essential issues concerning security, regulation, and consumer trust, while examining markets that may be ripe for a platform revolution, including healthcare, education, and energy.
As digital networks increase in ubiquity, businesses that do a better job of harnessing the power of the platform will win. An indispensable guide, Platform Revolution charts out the brilliant future of platforms and reveals how they will irrevocably alter the lives and careers of millions.

Virtual Freedom: How to Work with Virtual Staff to Buy More Time, Become More Productive, and Build Your Dream Business
Entrepreneurs often suffer from ”superhero syndrome”—the misconception that to be successful, they must do everything themselves. Not only are they the boss, but also the salesperson, HR manager, copywriter, operations manager, online marketing guru, and so much more. It’s no wonder why so many people give up the dream of starting a business—it’s just too much for one person to handle.

But outsourcing expert and ”Virtual CEO,” Chris Ducker knows how you can get the help you need with resources you can afford. Small business owners, consultants, and online entrepreneurs don’t have to go it alone when they discover the power of building teams of virtual employees to help run, support, and grow their businesses.

Virtual Freedom: How to Work with Virtual Staff to Buy More Time, Become More Productive, and Build Your Dream Business is the step-by-step guide every entrepreneur needs to build his or her business with the asset of working with virtual employees. Focusing on business growth, Ducker explains every detail you need to grasp, from figuring out which jobs you should outsource to finding, hiring, training, motivating, and managing virtual assistants.

With additional tactics and online resources, Virtual Freedom is the ultimate resource of the knowledge and tools necessary for building your dream business with the help of virtual staff.


Built to Sell: Creating a Business That Can Thrive Without You 
 According to John Warrillow, the number one mistake entrepreneurs make is to  build a business that relies too heavily on them. Thus, when the time comes to sell, buyers aren't confident that the company-even if it's profitable-can stand on its own. To illustrate this, Warrillow introduces us to a fictional small business owner named Alex who is struggling to sell his advertising agency. Alex turns to Ted, an entrepreneur and old family friend, who encourages Alex to pursue three criteria to make his business sellable: * Teachable: focus on products and services that you can teach employees to deliver. * Valuable: avoid price wars by specializing in doing one thing better than anyone else. * Repeatable: generate recurring revenue by engineering products that customers have to repurchase often.

The E-Myth Revisited: Why Most Small Businesses Don't Work and What to Do About It
An instant classic, this revised and updated edition of the phenomenal bestseller dispels the myths about starting your own business. Small business consultant and author Michael E. Gerber, with sharp insight gained from years of experience, points out how common assumptions, expectations, and even technical expertise can get in the way of running a successful business.
Gerber walks you through the steps in the life of a business—from entrepreneurial infancy through adolescent growing pains to the mature entrepreneurial perspective: the guiding light of all businesses that succeed—and shows how to apply the lessons of franchising to any business, whether or not it is a franchise. Most importantly, Gerber draws the vital, often overlooked distinction between working on your business and working in your business.
The E-Myth Revisited will help you grow your business in a productive, assured way.

Zero to One: Notes on Startups, or How to Build the Future
If you want to build a better future, you must believe in secrets.

The great secret of our time is that there are still uncharted frontiers to explore and new inventions to create. In Zero to One, legendary entrepreneur and investor Peter Thiel shows how we can find singular ways to create those new things.

Thiel begins with the contrarian premise that we live in an age of technological stagnation, even if we’re too distracted by shiny mobile devices to notice. Information technology has improved rapidly, but there is no reason why progress should be limited to computers or Silicon Valley. Progress can be achieved in any industry or area of business. It comes from the most important skill that every leader must master: learning to think for yourself.

Doing what someone else already knows how to do takes the world from 1 to n, adding more of something familiar. But when you do something new, you go from 0 to 1. The next Bill Gates will not build an operating system. The next Larry Page or Sergey Brin won’t make a search engine. Tomorrow’s champions will not win by competing ruthlessly in today’s marketplace. They will escape competition altogether, because their businesses will be unique.

Zero to One presents at once an optimistic view of the future of progress in America and a new way of thinking about innovation: it starts by learning to ask the questions that lead you to find value in unexpected places.

Exponential Organizations: Why new organizations are ten times better, faster, and cheaper than yours (and what to do about it)
Frost & Sullivan’s 2014 Growth, Innovation, and Leadership Book of the Year

In business, performance is key. In performance, how you organize can be the key to growth.

In the past five years, the business world has seen the birth of a new breed of company—the Exponential Organization—that has revolutionized how a company can accelerate its growth by using technology. An ExO can eliminate the incremental, linear way traditional companies get bigger, leveraging assets like community, big data, algorithms, and new technology into achieving performance benchmarks ten times better than its peers.

Three luminaries of the business world—Salim Ismail, Yuri van Geest, and Mike Malone—have researched this phenomenon and documented ten characteristics of Exponential Organizations. Here, in EXPONENTIAL ORGANIZATIONS, they walk the reader through how any company, from a startup to a multi-national, can become an ExO, streamline its performance, and grow to the next level.

“EXPONENTIAL ORGANIZATIONS is the most pivotal book in its class. Salim examines the future of organizations and offers readers his insights on the concept of Exponential Organizations, because he himself embodies the strategy, structure, culture, processes, and systems of this new breed of company.”—John Hagel, The Center for the Edge

Chosen by Benjamin Netanyahu, Prime Minister of Israel, to be one of Bloomberg's Best Books of 2015


The 4-Hour Workweek, Expanded and Updated
Forget the old concept of retirement and the rest of the deferred-life plan–there is no need to wait and every reason not to, especially in unpredictable economic times. Whether your dream is escaping the rat race, experiencing high-end world travel, earning a monthly five-figure income with zero management, or just living more and working less, The 4-Hour Workweek is the blueprint.

This step-by-step guide to luxury lifestyle design teaches:
•How Tim went from $40,000 per year and 80 hours per week to $40,000 per month and 4 hours per week
•How to outsource your life to overseas virtual assistants for $5 per hour and do whatever you want
•How blue-chip escape artists travel the world without quitting their jobs
•How to eliminate 50% of your work in 48 hours using the principles of a forgotten Italian economist
•How to trade a long-haul career for short work bursts and frequent “mini-retirements”


Growth Hacker Marketing: A Primer on the Future of PR, Marketing, and Advertising 
A Primer on the Future of PR, Marketing and Advertising

A new generation of megabrands like Facebook, Dropbox, Airbnb, and Twitter haven’t spent a dime on traditional marketing. No press releases, no TV commercials, no billboards. Instead, they rely on a new strategy—growth hacking—to reach many more people despite modest marketing budgets. Growth hackers have thrown out the old playbook and replaced it with tools that are testable, trackable, and scalable. They believe that products and businesses should be modified repeatedly until they’re primed to generate explosive reactions.

Bestselling author Ryan Holiday, the acclaimed marketing guru for American Apparel and many bestselling authors and multiplatinum musicians, explains the new rules and provides valuable examples and case studies for aspiring growth hackers. Whether you work for a tiny start-up or a Fortune 500 giant, if you’re responsible for building awareness and buzz for a product or service, this is your road map.

The New Strategic Selling: The Unique Sales System Proven Successful by the World's Best Companies 
The Book that Sparked A Selling Revolution In 1985 one book changed sales and marketing forever. Rejecting manipulative tactics and emphasizing "process," Strategic Selling presented the idea of selling as a joint venture and introduced the decade's most influential concept, Win-Win. The response to Win-Win was immediate. And it helped turn the small company that created Strategic Selling, Miller Heiman, into a global leader in sales development with the most prestigious client list and sought-after workshops in the industry. Now Strategic Selling has been updated and revised for a new century of sales success. The New Strategic Selling This new edition of the business classic confronts the rapidly evolving world of business-to-business sales with new real-world examples, new strategies for confronting competition, and a special section featuring the most commonly asked questions from the Miller Heiman workshops. Learn: * How to identify the four real decision makers in every corporate labyrinth * How to prevent sabotage by an internal deal-killer * How to make a senior executive eager to see you * How to avoid closing business that you'll later regret * How to manage a territory to provide steady, not "boom and bust," revenue * How to avoid the single most common error when dealing with the competition.

How to Win Friends & Influence People
Millions of people around the world have - and continue to - improve their lives based on the teachings of Dale Carnegie. In "How to Win Friends and Influence People" Carnegie offers practical advice and techniques, in his exuberant and conversational style, for how to get out of a mental rut and make life more rewarding. His advice has stood the test of time and will teach you how to: make friends quickly and easily; increase your popularity; win people to your way of thinking; enable you to win new clients and customers; become a better speaker and a more entertaining conversationalist; and, arouse enthusiasm among your colleagues. This book will turn around your relationships and improve your dealings with all the people in your life.



The Obstacle Is the Way: The Timeless Art of Turning Trials into Triumph
The Obstacle is the Way has become a cult classic, beloved by men and women around the world who apply its wisdom to become more successful at whatever they do.

Its many fans include a former governor and movie star (Arnold Schwarzenegger), a hip hop icon (LL Cool J), an Irish tennis pro (James McGee), an NBC sportscaster (Michele Tafoya), and the coaches and players of winning teams like the New England Patriots, Seattle Seahawks, Chicago Cubs, and University of Texas men’s basketball team.

The book draws its inspiration from stoicism, the ancient Greek philosophy of enduring pain or adversity with perseverance and resilience. Stoics focus on the things they can control, let go of everything else, and turn every new obstacle into an opportunity to get better, stronger, tougher. As Marcus Aurelius put it nearly 2000 years ago: “The impediment to action advances action. What stands in the way becomes the way.”

Ryan Holiday shows us how some of the most successful people in history—from John D. Rockefeller to Amelia Earhart to Ulysses S. Grant to Steve Jobs—have applied stoicism to overcome difficult or even impossible situations. Their embrace of these principles ultimately mattered more than their natural intelligence, talents, or luck.

If you’re feeling frustrated, demoralized, or stuck in a rut, this book can help you turn your problems into your biggest advantages. And along the way it will inspire you with dozens of true stories of the greats from every age and era.

The Wisdom of Crowds
In this fascinating book, New Yorker business columnist James Surowiecki explores a deceptively simple idea: Large groups of people are smarter than an elite few, no matter how brilliant–better at solving problems, fostering innovation, coming to wise decisions, even predicting the future. With boundless erudition and in delightfully clear prose, Surowiecki ranges across fields as diverse as popular culture, psychology, ant biology, behavioral economics, artificial intelligence, military history, and politics to show how this simple idea offers important lessons for how we live our lives, select our leaders, run our companies, and think about our world.

Originals: How Non-Conformists Move the World
The #1 New York Times bestseller that examines how people can champion new ideas—and how leaders can fight groupthink, from the author of Give and Take

“Reading Originals made me feel like I was seated across from Adam Grant at a dinner party, as one of my favorite thinkers thrilled me with his insights and his wonderfully new take on the world.” —Malcolm Gladwell, author of Outliers and The Tipping Point

“Originals is one of the most important and captivating books I have ever read, full of surprising and powerful ideas. It will not only change the way you see the world; it might just change the way you live your life. And it could very well inspire you to change your world.” —Sheryl Sandberg, COO of Facebook and author of Lean In

With Give and Take, Adam Grant not only introduced a landmark new paradigm for success but also established himself as one of his generation’s most compelling and provocative thought leaders. In Originals he again addresses the challenge of improving the world, but now from the perspective of becoming original: choosing to champion novel ideas and values that go against the grain, battle conformity, and buck outdated traditions. How can we originate new ideas, policies, and practices without risking it all?


The Lean Startup: How Today's Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses
Most startups fail. But many of those failures are preventable.  The Lean Startup is a new approach being adopted across the globe, changing the way companies are built and new products are launched.

Eric Ries defines a startup as an organization dedicated to creating something new under conditions of extreme uncertainty. This is just as true for one person in a garage or a group of seasoned professionals in a Fortune 500 boardroom. What they have in common is a mission to penetrate that fog of uncertainty to discover a successful path to a sustainable business.

The Lean Startup approach fosters companies that are both more capital efficient and that leverage human creativity more effectively.  Inspired by lessons from lean manufacturing, it relies on “validated learning,” rapid scientific experimentation, as well as a number of counter-intuitive practices that shorten product development cycles, measure actual progress without resorting to vanity metrics, and learn what customers really want. It enables a company to shift directions with agility, altering plans inch by inch, minute by minute.

Rather than wasting time creating elaborate business plans, The Lean Startup offers entrepreneurs - in companies of all sizes - a way to test their vision continuously, to adapt and adjust before it’s too late. Ries provides a scientific approach to creating and managing successful startups in a age when companies need to innovate more than ever.

Adapt: Why Success Always Starts with Failure 
In this groundbreaking book, Tim Harford, the Undercover Economist, shows us a new and inspiring approach to solving the most pressing problems in our lives. When faced with complex situations, we have all become accustomed to looking to our leaders to set out a plan of action and blaze a path to success. Harford argues that today's challenges simply cannot be tackled with ready-made solutions and expert opinion; the world has become far too unpredictable and profoundly complex. Instead, we must adapt.
Deftly weaving together psychology, evolutionary biology, anthropology, physics, and economics, along with the compelling story of hard-won lessons learned in the field, Harford makes a passionate case for the importance of adaptive trial and error in tackling issues such as climate change, poverty, and financial crises—as well as in fostering innovation and creativity in our business and personal lives.
Taking us from corporate boardrooms to the deserts of Iraq, Adapt clearly explains the necessary ingredients for turning failure into success. It is a breakthrough handbook for surviving—and prospering— in our complex and ever-shifting world.

The Ten Faces of Innovation: IDEO's Strategies for Defeating the Devil's Advocate and Driving Creativity Throughout Your Organization
The author of the bestselling The Art of Innovation reveals the strategies IDEO, the world-famous design firm, uses to foster innovative thinking throughout an organization and overcome the naysayers who stifle creativity. 

The role of the devil's advocate is nearly universal in business today. It allows individuals to step outside themselves and raise questions and concerns that effectively kill new projects and ideas, while claiming no personal responsibility. Nothing is more potent in stifling innovation.

Drawing on nearly 20 years of experience managing IDEO, Kelley identifies ten roles people can play in an organization to foster innovation and new ideas while offering an effective counter to naysayers. Among these approaches are the Anthropologist—the person who goes into the field to see how customers use and respond to products, to come up with new innovations; the Cross-pollinator who mixes and matches ideas, people, and technology to create new ideas that can drive growth; and the Hurdler, who instantly looks for ways to overcome the limits and challenges to any situation.

Filled with engaging stories of how companies like Kraft, Procter and Gamble, Cargill and Samsung have incorporated IDEO's thinking to transform the customer experience, THE TEN FACES OF INNOVATION is an extraordinary guide to nurturing and sustaining a culture of continuous innovation and renewal.

Selling your Software Company - An Insider's Guide to Achieving Strategic Value How the Merger and Acquisition Process Really Works and What You Can Do To Win 
Selling your technology company for strategic value involves far more than creating a great technology, product, or service. Much of your success will depend on your business model and important value drivers such as contractually recurring revenue and network effects. The most important factor is the process you employ when you sell your company. The greater your company's reliance on the leverage of technology, the greater the room for the market to interpret its selling price.
We explore all aspects of the M&A process, from the planning and marketing to the Letter of Intent, due diligence, and closing, and everything in between. We discuss topics like the subtle language that buyers use in LOI's that can cost sellers huge swings in value at closing; optimal transaction structures, avoiding punishing net working capital adjustments, negotiating tactics, and much more. This book is a must read for the tech entrepreneur contemplating the sale of their business.
In order to maximize your company's value you must fully engage the competitive marketplace. We have see seen swings in the value of technology companies of millions of dollars between an unsolicited offer for a small software company by a Private Equity Group and the ultimate purchase transaction from a strategic industry player. That staggering result is the difference from  selling at a cash flow multiple and selling for strategic value in a competitive soft auction.
The greater the complexity of the process, the greater the advantage to the one with experience. Just ask a rookie quarterback in his first NFL start. Selling a business is a highly complex process and the business seller is usually in their first transaction while the typical buyer has made dozens of prior acquisitions. This book attempts to level the playing field by sharing the author's seventeen years of deal making experience representing technology focused sellers of businesses.




Dave Kauppi is a Merger and Acquisition Advisor and President of MidMarket Capital, providing business broker and investment banking services to owners in the sale of information technology, software, and other technology based companies. Dave is also the editor of the Exit Strategist Newsletter and author of the Book Selling your Software Company - An Insider's Guide to Achieving Strategic Value

Friday, November 4, 2016

New Client Sell Side Engagement - Online Marketplace Handmade Goods & Craft Supplies



Acquisition Opportunity


·         The Omni-Channel Imperative: Retailers are responding to the Amazon success by creating their own marketplaces like Sears.com or acquiring a platform like Wal-Mart's acquisition of Jet. The growth in retail is clearly in the online space.
·         Recurring Revenue Business Model: Generated from a mix of marketplace flat rate shop fees, Item Listing Fees (ILF) and variable fees on sales volume. Seller pays for services such as prominent placement in search results via a Featured Store.  Other revenue includes the fees we receive from a third-party payment processor and from a third-party advertiser.
·         Proprietary expertise: With the original Marketplace established in 2008, this battle tested platform not only delivers the latest technology, but has helped sellers generate over $100 million in lifetime gross merchandise sales.
·         Current Market Metrics This "ETSY Like Marketplace" has almost 12,000 active merchants and over 8 million unique visitors over the past 12 months.

·         The Strategic Acquirer:  Can immediately leverage this marketplace technology and expertise into your Omni-Channel offering, acquire a loyal community of sellers and buyers and incorporate a virtuous circle of craft product suppliers and buyers as well as makers / sellers and buyers of handcrafted goods.


Dave Kauppi is a Merger and Acquisition Advisor and Managing Director of MidMarket Capital, providing business broker and investment banking services to owners in the sale of information technology companies. To learn more about our services for technology business sellers click to visit our Web Site MidMarket Capital

Friday, October 14, 2016

Just Published Amazon Kindle Selling Your Software Company - An Insider's Guide to Achieving Strategic Value



Selling your technology company for strategic value involves far more than creating a great technology, product, or service. Much of your success will depend on your business model and important value drivers such as contractually recurring revenue and network effects. The most important factor is the process you employ when you sell your company. The greater your company's reliance on the leverage of technology, the greater the room for the market to interpret its selling price.

We explore all aspects of the M&A process, from the planning and marketing to the Letter of Intent, due diligence, and closing, and everything in between. We discuss topics like the subtle language that buyers use in LOI's that can cost sellers huge swings in value at closing; optimal transaction structures, avoiding punishing net working capital adjustments, negotiating tactics, and much more. This book is a must read for the tech entrepreneur contemplating the sale of their business.

In order to maximize your company's value you must fully engage the competitive marketplace. We have see seen swings in the value of technology companies of millions of dollars between an unsolicited offer for a small software company by a Private Equity Group and the ultimate purchase transaction from a strategic industry player. That staggering result is the difference from  selling at a cash flow multiple and selling for strategic value in a competitive soft auction.


The greater the complexity of the process, the greater the advantage to the one with experience. Just ask a rookie quarterback in his first NFL start. Selling a business is a highly complex process and the business seller is usually in their first transaction while the typical buyer has made dozens of prior acquisitions. This book attempts to level the playing field by sharing the author's seventeen years of deal making experience representing technology focused sellers of businesses.


Dave Kauppi is a Merger and Acquisition Advisor and Managing Director of MidMarket Capital, providing business broker and investment banking services to owners in the sale of information technology companies. To learn more about our services for technology business sellers click to visit our Web Site MidMarket Capital

Tuesday, August 9, 2016

How to Increase the Selling Price of Your Business by 40% or More





This sounds like a bold claim, but over our 17 year history in Mergers and Acquisitions we have seen huge swings in value for business sellers that embraced these value enhancing approaches.

Never - Engage with a single buyer who approaches you with an unsolicited offer. This buyer is trying to buy your company at a bargain price. You are either for sale with the full universe of strategic buyers competing for your company, or you are not for sale. This is the number one error business sellers make.

Turn as much of your revenue as possible into contractually recurring revenue. This is exactly why most major software companies are moving away from a one-time licensing fee to a software as a service (SaaS) offering. The time and materials IT service model is disappearing and being replaced with a managed services offering. Contractually recurring revenue tremendously reduces the risk for a business buyer and they will pay up for it both in purchase price and the percentage of cash at closing versus earnouts and deferred contingent payments.

Create and leverage intellectual capital. Just ask a song writer or an author. Disney is a master at creating compelling movie characters and then using them on everything from lunch boxes and underwear to action figures and amusement park rides. For intellectual capital including software, inventions, approved drugs, the labor plus materials metrics of a typical manufacturer do not apply and the gross margins can approach 100%.

Become a voice of authority in your industry. Be the go-to resource for reporters to comment on industry developments. Blog, write articles, and speak at industry events. Many M&A deals that result in huge premiums for the selling company are the result of also acquiring the company's talent.  Take Wal-Mart's acquisition of Jet. How much of that premium price was a result of the visionary CEO Marc Lore and his potential impact on the giant acquiring company. Acquisitions by Google, Facebook, Microsoft and many others feature this premium price for companies with coveted talent.

Understand and document how a large acquiring company could create "strategic value" as the new owner of your company. Capture that in a growth plan document and be ready to articulate that in discussions with potential buyers.

Own your financial statements. When a buyer asks a question on aspects of your financial statements, it is not your accountant's job. It is your job to understand where every dollar comes from and where every dollar goes. The message is that you are in control. If you are wishy washy in this area, the buyer loses confidence in all other facets of your business and will apply their own discount on the entire transaction value.

Diversify your customer base. If you have a major portion of your company's revenues concentrated in a hand full of customers, count on the buyer applying a punishing discount to transaction value and the amount of transaction value you receive at closing. The implied message is that after you leave, your customers will no longer be loyal to the old company. They will hedge their bets with your transaction value.

Do not attempt to sell your company yourself. Here are just a few reasons. You already have more than a full time job. Selling a business is a full time job. Normally a business seller will sell only one business in a lifetime. Experienced buyers have acquired dozens of companies. Their experience will move money from your pockets to their pockets at every stage of the sale process. You will have a very difficult time creating a true soft auction competitive bidding process and will default to processing each buyer in a serial fashion. You lose all competitive leverage. By selling your own business, you alert the world that you are for sale. Your employees, clients, suppliers, and bankers get nervous while your competitors get predatory.

Hire a good M&A advisor, preferably with experience in your industry or market niche to represent you. They will speak the language, so important in establishing credibility with the buyers. They will have a fully developed database with the appropriate M&A contacts at the target buying companies. They will articulate your story to the best buyers. They will balance the experience scales in negotiating price, terms and conditions of your transaction and perhaps more importantly, will defend that value through term sheets, due diligence, contractual negotiations and closing. Finally, they will artfully stimulate the animal spirits of a competitive market to maximize your selling price and terms.

The sad part about business owners who elect to sell their business themselves, is that the only one who knows about the huge haircut they took was the single buyer who is celebrating their bargain purchase.

For more detailed information on all aspects of Business Sales, please visit our website at www.midmarkcap.com/mmc and subscribe to our Exit Strategist Newsletter.

Dave Kauppi is a Merger and Acquisition Advisor and Managing Director of MidMarket Capital, providing business broker and investment banking services to owners in the sale of information technology companies. To learn more about our services for technology business sellers click to visit our Web Site MidMarket Capital

Thursday, July 28, 2016

How You Sell Your Business Determines its Selling Price



How much is my business worth?  That depends. Of course it depends on profits, sales, EBITDA, and other traditional valuation metrics. A surprisingly important factor, however, is how you choose to sell it.  If your business is larger, complex, unusual, strategic, with a high component of intellectual property or technology and subject to a broad interpretation of value in the marketplace then how you choose to sell it can result in swings of literally millions of dollars in transaction value. The Graph above attempts to illustrate this concept:

The way to achieve the most value from the sale of your company is to get several strategic buyers all competing in a soft auction process. That is the holy grail of company valuation. There are several exit or value options. Let's examine each one starting with the lowest which is liquidation value.

Liquidation Value – This is basically the sale of the hard assets of the business as it ceases to be a going concern.  No value is given for good will, brand name, customer lists, or company earnings capability. This is a sad way to exit a business that you spent twenty years building. This method of selling often occurs when the owner has a debilitating health issue or dies and his estate is forced to sell.

Book Value - is simply an accounting treatment of the physical assets. Book value is generally not even close to the true value of a business. It only accounts for the depreciated value of physical assets and does not take into account such things as earnings power, proprietary technology, competitive advantage, growth rate, and many other important factors. In case you are working on a shareholder agreement and looking for a methodology for calculating a buy-out, Book value is a terrible metric to use. A better approach would be a multiple of sales or EBITDA. Minority shareholders often unknowingly sign shareholder agreements that provide a book value buyout if the minority shareholder decides to cash out.

Unsolicited Offer to Buy from a Competitor – This is the next step up in value. The best way I can describe the buyer mindset is that they are hoping to get lucky and buy your company for a bargain price. If the unsuspecting seller bites or makes a weak counter offer, the competitor gets a great deal.

How should you handle this situation so you do not have this outcome? We suggest that you do not let an outside force determine your selling timeframe. However, we recognize that everything is for sale at the right price. That is the right starting point. Get the buyer to sign a confidentiality agreement. Provide income statement, balance sheet and your yearly budget and forecast.

Determine the number that you would accept as your purchase price and present that to the buyer. You may put it like this, " We really were not considering selling our company, but if you want us to consider going through the due diligence process, we will need an offer of $6.5 million. If you are not prepared to give us a LOI at that level, we are not going to entertain further discussions."

A second approach would be to ask for your  number and if they were willing to agree, then you would agree to begin the due diligence process. If they were not, then you were going to engage your merger and acquisition advisor and they would be welcome to participate in the process with the other buyers that were brought into the competitive selling process. 


Another tactic from this bargain seeker it to propose a reasonable offer in a qualified letter of intent and then embark on an exhaustive due diligence process. He uncovers every little flaw in the target company and begins the process of chipping away at value and lowering his original purchase offer. He is counting on the seller simply wearing down since the seller has invested so much in the process and accepting the significantly lower offer.

Buyer Introduced by Seller's Professional Advisors – Unfortunately this is a commonly executed yet flawed approach to maximizing the seller's transaction value. The seller confides in his banker, financial advisor, accountant, or attorney that he is considering selling. The well-meaning advisor will often "know a client in the same business" and will provide an introduction.  This introduction often results in a bidding process of only one buyer. That buyer has no motivation to offer anything but a discounted price.

Valuation From a Professional Valuation Firm – At about the midpoint in the value chain is this view of business value. These valuations are often in response to a need such as gift or estate taxes, setting up an ESOP, a divorce, insurance, or estate planning. These valuations are conservative and are generally done strictly by the numbers. These firms use several techniques, including comps, rules of thumb, and discounted cash flow. These methods are not great in accounting for strategic value factors such as key customers, intellectual capital, or a competitive bidding process from several buyers.

Private Equity or Financial Buyer – In this environment of tight credit, the Private Equity Groups still have a good amount of capital and need to invest in deals. The very large deals are not currently getting done, but the lower middle market transactions are still viable. The PEG's still have their roots as financial buyers and go strictly by the numbers, and they have tightened the multiples they are willing to pay. Where two years ago they would buy a bricks and mortar company for 6 ½  X EBITDA, they are now paying 5 X EBITDA.

Strategic Buyers in a Bidding Process – The Holy Grail of transaction value for business sellers is to have several buyers that are actively seeking to acquire the target company. One of the luckiest things that has happened in our client's favor as they were engaged in selling their company was an announcement that a big company just acquired one of the seller's competitors. All of a sudden our client became a strategic prized target for the competitors of the buying company. If for no other reason than to protect market share, these buyers come out of the woodwork with some very aggressive offers.

This principal holds as an M&A firm attempts to stimulate the same kind of market dynamic. By positioning the seller as a potential strategic target of a competitor, the other industry players often step up with attractive valuations in a defensive posture.

Another value driver that a good investment banker will employ is to establish a strategic fit between seller and buyer. The advisor will attempt to paint a picture of 1 + 1 = 3 ½.  Factors such as eliminating duplication of function, cross selling each other's products into the other's install base, using the seller's product to enhance the competitive position of the buying company's key products, and extending the life of the buyer's technology are examples of this artful positioning.

Of course, the merger and acquisition teams of the buyers are conditioned to deflect these approaches. However, they realize that their competitors are getting the same presentation. They have to ask themselves, "Which of these strategic platforms will resonate with their competitors' decision makers?"


As you can see, the value of your business can be subjectively interpreted depending on the lenses through which it is viewed. The decision you make on how your business is sold will determine how value is interpreted and can result in 20%, 30%, 40%, or even 100% differences in your sale proceeds.

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Dave Kauppi is a Merger and Acquisition Advisor and Managing Director of MidMarket Capital, providing business broker and investment banking services to owners in the sale of information technology companies. To learn more about our services for technology business sellers click to visit our Web Site MidMarket Capital