What You'll Learn...
- How to identify and sell the strategic value that makes your company unique.
- Steps to layer and leverage strategic value for a bigger-than-you-thought exit.
- How strategic value can outshine financial metrics in selling your business.
- Master crafting compelling narratives to attract top-tier buyers effectively.
- Discover and leverage your company's hidden intangible assets for higher sale prices.
- Identify and appeal to the right buyers.
The spreadsheet vs. strategic value
When you’re looking to sell your company, most buyers, especially the top-tier ones, are not just in the market for strong financial numbers.
Take, for instance, KYCK, my fifth venture. KYCK was a platform that solved a problem deeply personal to me and countless others involved in youth sports: managing a team without it being completely painful. The goal was to allow coaches to focus on coaching and players on playing.
Our product quickly became a leader in youth soccer, but as the industry heated up, we faced a crossroads: seek more funding or sell.
The market was bustling, competitors were raising massive funds, and the need for a strategic exit became clear.
But how? How could we maximize the value we were getting for the platform we cared about?
The answer was by crafting a narrative so compelling, so tailor-made for our potential buyers, that the strategic value of KYCK became undeniable.
To a dominant player in the mobile app space, we pitched KYCK as the key to unlocking a vast, untapped market. Our platform wasn’t just about roster management; it was a gateway to instant access to thousands of teams, a direct line to growth in the highly competitive sports registration space.
To a tech media giant looking to penetrate the youth sports market, KYCK presented an unparalleled opportunity to connect their brand with youth soccer. Our relationships in the soccer community meant they could leapfrog the painstaking process of cold outreach, instantly having a big presence.
In both narratives, KYCK remained constant, but the story adapted, highlighting specific strategic advantages tailored to each buyer.
Our strategic and personalized storytelling didn’t just attract interest; it sparked a bidding war.
Ultimately, we were acquired by NBC Sports.
Here’s a pivot every founder looking to exit their company needs to make in their thinking, and I cannot stress this enough: You have to focus on creating and selling the strategic value of your business.
In both narratives, KYCK remained constant, but the story adapted, highlighting specific strategic advantages tailored to each buyer. Our strategic and personalized storytelling didn’t just attract interest; it sparked a bidding war. Ultimately, we were acquired by NBC Sports.
Why strategic value matters
No matter the financial metrics thrown around—be it EBITDA or revenue multiples—the real big transactions are closed on the bedrock of strategic drivers.
Time and time again, I’ve stood before groups, trying to sell the power of strategic value, only to have skeptics come up after the meeting and tell me, “It’s all about EBITDA or revenue; strategic value is all fluff.”
They couldn’t be more wrong.
In 2020, 90% of the S&P 500’s most impactful companies’ market value was rooted in intangible assets. What does this encompass? Brands, copyrights, patents, formulas, and trade secrets—not tangible assets like plants or machinery.
Intangible assets are far from ‘fluff’; they’re the cornerstone of 90% of major business’s market value.
At ExitDNA, I work with founders to help them uncover and refine their company’s strategic value. We consistently discovered hidden strategic assets they’ve overlooked. When these assets were identified and included in the deal, what was once a standard product line transformed into a proprietary, trademarked juggernaut.
And why does this matter? That proprietary, trademarked juggernaut holds a lot of value in dollars, increasing the overall sale price.
Do not undervalue the ‘fluff’ in your business.
Yes, you could start looking for a sale based on your numbers, maybe even securing a deal at 15x EBITDA or 4x revenue.
However, I’ve learned from experience that selling your company purely on financial metrics means missing out on big gains. Even if you land a deal that beats industry averages, failing to leverage your company’s strategic value means you left a lot of money on the table.
Ways to find and stack strategic value drivers
Right now, I’m going to help you find strategic value in your business.
When founders go through the process I’m about to show you, I’m often asked, “What’s the best kind of strategic asset?”
My response? Every single one of them.
You need to look at your business with fresh eyes, finding as many of these value drivers as possible.
This process, which I like to call stacking value, is not about focusing on a single element—your trademark, brand, or distribution channel. It’s about the combination of these assets, layered together, helping you craft a compelling, and lucrative, narrative for your company.
Here’s how to start adding and layering these strategic value drivers:
Step 1: Demonstrate your unique value
Begin by identifying what sets you apart. This could be anything from a groundbreaking product to a niche service that fills a gap in the market.
- Analyze your customer feedback for hints about what they can’t find elsewhere.
- Study your competitors closely, looking for what they lack that you offer.
- Engage with your team in brainstorming sessions to identify your unique strengths and innovations.
Buyers are searching for exclusivity—things they can’t find with anyone else. If you have one, it can make your business irresistible.
Step 2: Present them an exciting brand
Creating a brand that stands out and connects with people is a great way to prepare for a big exit. If a potential buyer has great products but a dull brand, your brand can make all the difference to their company. Here’s how to quickly gloss up your brand.
- Tap into current trends, understand what your audience loves, and play into it.
- Engage actively on social media to gather feedback and show you’re listening.
- Refresh outdated brand elements like logos or websites to reflect today’s design trends.
- Make sure you have consistent messaging and design language.
- Gather and showcase customer testimonials and reviews to build trust.
If you have a brand that’s alive, relevant, and exciting, it will become a major value driver in the acquisition.
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Step 3: Secure your intellectual property
Intellectual property (IP)—including copyrights, trademarks, patents, and trade secrets—is a buyer’s treasure trove. It represents the unique aspects of your business that are legally protected. Potential acquirers are willing to pay top dollar for these kinds of assets.
To capitalize on this, conduct a thorough audit of your business to identify all your IP assets. Once identified, take the necessary legal steps to secure and protect these rights. This might involve:
- Registering trademarks
- Applying for patents
- Establishing confidentiality agreements to safeguard trade secrets
Most founders avoid spending time on their intellectual property, but I’ve found over the years that intellectual property tends to be the low-hanging fruit that most people completely miss. Identifying and protecting your intellectual property makes your business a much more attractive and valuable proposition to buyers.
Step 4: Carve out unique distribution channels
Having a unique or proprietary distribution channel is a great tool to attract buyers, especially ones who are looking for ways to penetrate new markets and reach fresh audiences.
If your business can bypass traditional routes and directly access untapped customer segments, you have an edge.
Exclusive deals, innovative delivery methods, or a unique online platform can serve as powerful distribution channels. Highlighting these assets increases your attractiveness to prospective buyers, opening new opportunities for your business.
In 2020, 90% of the S&P 500’s most impactful companies’ market value was rooted in intangible assets. What does this encompass? Brands, copyrights, patents, formulas, and trade secrets—not tangible assets like plants or machinery. Intangible assets are far from ‘fluff’; they’re the cornerstone of 90% of major business’s market value.
Step 5: Nurture a loyal customer base
Having a circle of customers obsessed with your product changes the game when it comes to exits.
When your inbox is flooded with stories of how your creation made a difference, or when social media is buzzing with shoutouts about your latest release, that’s when you know you’ve built something special. This kind of customer loyalty is like catnip for buyers. As founders, we need to lean into this more.
- Engage with your customers like they’re a part of your founding team.
- Surprise them, not just with what you sell but how you sell it.
- Listen to their feedback like it’s the blueprint for your next big move.
- Create moments that turn customers into advocates.
- Host events, run exclusive sneak peeks, and celebrate their milestones.
When you’ve got an army of brand evangelists, you’re setting the stage for a blockbuster exit.
Step 6: Leverage exclusive agreements
This one has probably worked better for me than just about any others on this list.
If you hold exclusive contracts or agreements and possess unique suppliers of raw ingredients or materials with whom you have unique long-term distribution deals through contractual obligations, you have something better than gold. This type of exclusivity is exactly what buyers want.
This is especially true if you have something before everyone else knows about it.
If you can lock down that contract, distribution, supply chain, or whatever it is with an exclusive agreement, that can be worth a lot of money during the sale.
Finding and selling to the right buyer
When considering who might be lining up to buy their company, founders often split the field into two camps: financial and strategic Buyers. There’s a common misconception that financial buyers are all about the numbers, while strategic buyers are all about the assets we listed above.
But really, that divide isn’t as wide as you might think.
Even financial buyers, with their love for analytics and spreadsheets, are constantly searching for strategic value. They look at what makes your company unique. Don’t get me wrong, they probably still want to see your historical cash flow, but they also want to know how much your strategic value drivers are worth.
Think about it, imagine you’re in a lineup with three other businesses, each boasting $1 million in EBITDA. What makes the buyer pick you?
All things equal, the decision goes to the company that brings the most strategic value—a proprietary product, a unique distribution channel, or a hot brand.
Commit this to memory: financial buyers are in the market for strategic value. The problem is that their language is filled with terms like ROI, EBITDA, and other financial metrics—often sounds like they’re just number-crunching. That’s why it’s critical for you, the founder, to understand and sell the strategic value of your business.
It’s your job to shift the conversation beyond spreadsheets.
Show them why your business has been outperforming, not just through financial metrics, but because of the unique assets you’ve built: proprietary products, the innovative distribution channel, and a brand that captures hearts and minds.
You’ve already done the work, you might as well get the credit.
You’re not selling them numbers; you’re selling them your company. Every part of it. Your buyers are looking for a reason to believe your business will continue to thrive and grow under their ownership.
It’s your job to show them that reason.
