I’ve been involved in investment banking for 18 years and have spoken with hundreds of business owners that seek a great result in selling their business.
What is a great result? It is getting the highest price, best terms, and highest likelihood of close possible for the company in question.
How do you achieve a great result? Make the buyer feel safe. Institutional investors are extremely risk averse. They pass on the vast majority of deals that come their way. A middle market private equity firm might see 1,200 opportunities a year, meet with 500 prospects, perform some level of due diligence on 50, and close on 5.
The main reason buyers end up passing on deals is the perception of risk. If you can reduce the perception of risk before the investor looks at your deal, you’re dramatically more likely to attract and retain their interest.
I’ve worked with hundreds of business owners in shaping their marketing materials and helping them reduce the perception of risk. In the process I encountered problems that ended up derailing deals. These repeated with such frequency I eventually came up a list of six key issues, put a weighting on each, and invented the FEISTY score.
The FEISTY score is a simple and transparent way of describing a company’s attractiveness to a buyer—its “sellability.” The score focuses on six areas. In each area the lower the risk, the safer the buyer feels, and the higher the score. A firm can have a FEISTY score between 0 and 12. Because SSK only takes companies to market with a FEISTY score of 9 or better, we have an extremely high success rate in sales.
The good news is that for each of the FEISTY elements, there are things you can do to improve your score. So for me, long before the sales process begins, I like to sit down with clients, review their FEISTY score, and develop a list of tasks. That way when the time to sell comes, they will get a great result.
What is FEISTY?
- Financially stable
- Easy to understand
- Industry in favor
- Size is good
- Timing is right
- You can leave the business without blowing it up
Over the next six weeks, we’ll be looking at each of these in turn.