Carr-Michael

" Carr-Michael played a major role in establishing a framework for the strategic evaluation of opportunities and drove the identification of specific initiatives.... "

MD International automotive company

Profit Fast and Sell On

15.06.2010


Carr-Michael works with a lot of businesses that say they want to “profit fast and move on”. Many companies and business owners who work with us, they are very clear about what “profit” means. They are also clear about when and how to sell. In the new economy with rapidly changing customer needs and niche segments, the number of opportunities to build fast and sell on will continue to grow. Developing your ability to take advantage of these fast emerging and changing micro markets helps generate a great source of sustainable “profit”.


For many of our clients “profit” is therefore not just a financial return on operations. It is a broader definition. It includes financial returns on current operations, but it also includes the profit on the sale of the business. On this basis many successful entrepreneurs instinctively know when it is the right time to sell. Too early and they miss the operating profit and bigger earnings multiple, too late and they run the risk of a distress sale just to release resources.


Additionally, although there is plenty of desire to profit fast and sell on, the reality is that most clients actually want to “profit fast and sell on” only parts of their business. They set the company up to be able to add and divest elements of the business as markets change and new opportunities emerge.
In addition to financial returns, their broader definition of profit also includes the lessons they learned in defining, developing and managing an SME from start up to sale. The experience and understanding of specific markets and how to grow and sell businesses are core elements in developing their expertise in delivering financial returns. This personal development includes an increased capability to spot new markets and emerging trends with new or existing customers. It is no surprise that many private angel investors stick to specific sectors. Their understanding of sub segments within industries provides great insight and capability to help commercialise new ideas and concepts faster and more profitably.


To improve your total profit, the timing of the sale is critical. Not just in terms of the economy or the development of a sector, but in the ability of the business being sold to show a capability to grow progressively and sustainably. Often SMEs achieve better earnings multiples once they have demonstrated an ability not only to grow with the first wave of early adopters, but also through second stage growth. Second stage growth uses newly established internal processes and structures to deliver further growth beyond the early adopters, and proves the company’s ability to progress from early growth to mainstream.


However many SMEs serve a specific market and enjoy reasonable returns without pushing hard for growth. They enjoy a stable set of customers and a relatively stable level of demand. This doesn’t stop them saying that they want to “profit fast and sell on”, it just means that it remains an unrealised hope. In effect they have never learnt the ability to profit from how to grow and sell businesses, they have only learned how to grow and then maintain the status quo. Most of the time this is because they have failed to put in the processes and structures that allow them to step back from the business and let others operate it, giving them the time and resources to find new exciting and high growth micro markets. In our experience this separates the entrepreneurial SME from the constrained player.