Building Value #21: Buyers Don't Pay for Your Past

Hello everyone and thank you for joining me for another edition of Building Value. Buyers don't pay for your past. Strong revenue, strong growth, it gets you attention, it earns credibility, and it gets you in the door, but it doesn't determine value. Buyers pay for the future. And more specifically, they pay for how compelling the growth story of that future is. And while the numbers certainly weigh heavily on any business's sale price, the story is what determines whether that multiple lands towards the bottom or the top of your peers.

So, what does this mean for you as the owner? It means that if you want to maximize the money that you walk away with at closing, it's your responsibility to craft a clear, compelling, and concise growth story, one that the buyer can almost feel themselves living out in the moment. This becomes especially important if you don't want to have your payout tied up in years of earn-outs with you still heavily involved, but that's a story for another video.

This story, your story, also can't be one built on hope or broad generalities. Instead, it must be a story that clearly details two things very well. First, how and where the business is set up for exponential growth, the growth silos that are ready to be exploited with just the right infusion of capital. And second, why this buyer's capital is the exact right capital to unlock that growth, why they are the partner to best assist you on that path to the next level.

This is where we spend a lot of time with owners. First, ensuring that they even have a growth story to tell. And second, pressure testing that story against the one a buyer needs to hear. When the story is vague, lacks excitement, or feels dependent on the owner, that shows up in deal terms. And while buyers are certainly buying your current and future cash flow, they also need to buy into the belief behind this story.

Now, to be clear, this isn't about spinning a tale that feels more like a fictional best-seller than reality. It needs to be grounded in facts, but it also needs to reflect a future that may feel bigger than anything you've thought to build towards before. And that's okay. That's also why you need to start thinking about this today, to begin intentionally crafting your beginning, middle, and end, one that builds towards a clear crescendo. A future that feels so compelling that it would make anyone feel like a fool if they didn't make you their absolute best offer just to partner with you on this opportunity.

And once you think you're ready, test it. On your spouse, on your friends, on your family. Pay close attention to where you lose them, where your story falters, and where it needs tightening or clarity. Because the last place you want to find yourself realizing that your story isn't as tight as it could have been is at the deal table. So, get to work today. Clarify the growth strategy. Define the levers that will drive it. And align that strategy and that story with the type of buyer and capital that can accelerate it and that you are most interested in partnering with.

A clear, credible story can mean a couple turns of multiples, often translating to hundreds of thousands, if not millions of dollars in final enterprise value, which for just a bit of focused thinking and practice isn't a sum of money worth leaving on the table. Thanks for joining me, everyone. Until next month, keep building value.