Big companies are on the prowl for little ones. Our own data over at The Sellability Score shows the proportion of business owners who have received an unsolicited bid for their business in the last year has gone up to 17%--the highest it's been since we started measuring in 2012.
With interest rates low and stock valuations still high (even after the selloff in September), there has never been a better time to get the attention of an acquirer. Here are 10 things you can do to make your business attractive to a buyer:
1. Get Subscribers
According to our analysis at The Sellability Score, we find the average business trading at about 3.6 times pretax profit. But this pales in comparison to the 4-6 times revenue that cloud-based software companies fetch, in large part because they have subscribers who pay regularly, unlike traditional companies that have customers who may only buy once.
2. Attract Fans
If your company has a five-figure Twitter or Facebook following, a rich, stodgy giant may see your business as a shortcut into a more social business world.
3. Drive Hockey Stick Growth
Lumbering slow-growth companies love strapping a canister of rocket fuel onto their business by acquiring a company experiencing 30-percent-plus year-over-year revenue growth.
4. Hire a 2iC
According to our research, a management team will help your business grow but it may not add much to your overall valuation. The one hire that does boost your offer multiple is a second-in-command who can take the reins of your business after you hit the beach.
If you have a large and diverse customer base with no single customer representing more than 10% of your business, an acquirer will view your revenue as immune to the loss of a single customer.
6. Build a Brand
Having a differentiated (and defendable) market position gives you pricing authority, which in turn drives fatter margins and more money to dump into marketing. Acquirers will realize your brand forms a thick defense shield against hungry competitors.
7. Clean Up Your Books
When a big company is considering buying a little one, the acquirer is concerned about the risk it may be inheriting. While its $900-dollar-an-hour lawyer will try to protect its downside in an acquisition, audited financial statements will give it a lot more confidence than a printout of your QuickBooks file.
8. Build an Intel Inside Product
It's natural to be self-centered and assume an acquirer will buy your business because it wants to sell your product to its customers. However, the inverse is usually a much stronger motivator for an acquirer. Big companies often want to bolt your product onto their own in order to make their existing product-set more attractive. If you have a killer product an acquirer can integrate, it may look at acquiring your business as a way to breathe new life into an old product lineup.
9. Find a Killer Location
If an acquirer wants to break into a new market--whether it's a new town, region, or country--it may acquire your business to get your physical location as a beachhead.
10. Get Some Industry Buzz
If you're the darling of your industry in the trade media, acquirers will be keen to have some of your pixie dust rub off on them.
If interest rates go up or the stock market drops further (or both), it will become harder for big companies to acquire little ones. Now is the perfect time to make yourself irresistible to a buyer.