Growth Opportunities

Most buyers will ask why you’re selling when you’re at a supposed inflection point in your business. Your answer will either strengthen or destroy your positioning. The solution is to prepare a short plan that outlines the growth potential of your business. Highlight the major ways you can grow your business and include a short, bulleted list for each growth opportunity. Ideally, you should begin executing your growth plan before putting your business on the market, so you can establish assumptions that can be used in your plan. Having real-world data to back up your assumptions will give you and your plan much more credibility. 

You should also prepare a set of simplified financial projections. Here are some guidelines to keep in mind when preparing your projections:

• Don’t lump all revenue streams together. Break revenue down by product and service type.
• Include three sets of assumptions – low, medium, and high. 
• Av0id so-called hockey stick business plans – scenarios that show steep increases following periods of flat performances. These will diminish your credibility. 
• Prepare your financial projections in a spreadsheet, so the buyer can play with the numbers to determine the impact of any potential changes in the variables and perform a sensitivity analysis. 
• Provide backup documentation for each key assumption. To do that, consider the following questions:
  • What’s the basis for forecasting each source of revenue? 
  • What’s the basis for forecasting costs? Are they based on a percentage of revenue, fixed costs subject to inflation, or something else? 
  • What are the assumptions behind capital expenditures over the coming years?

Action Steps

• Prepare a brief plan that outlines the potential growth opportunities in your business. Highlight the major ways a buyer can grow your business and include a short, bulleted list for each growth opportunity. Outline your assumptions and back them up with data.
• Prepare financial projections. Here’s how:
  • Separate revenue streams.
  • Include three sets of assumptions – low, medium, and high.
  • Document and provide backup documentation for each key assumption.