As you get closer to an actual acquisition event, focusing on key metrics will ensure you get the best valuation for your business—and a deal that makes sense for you.
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Financial Metrics for Exiting Your Company
Prepping for an Acquisition? Focus on these 5 KPIs
As you get closer to an actual acquisition event, focusing on key metrics will ensure you get the best valuation for your business – and a deal that makes sense for you.
The metric: Sales growth
The mission: Aim high
The why
Sales growth indicates the commitment of management toward improving revenue and product viability.
Companies targeted for acquisition typically have higher growth by 2.4 percentage points than non-targets1
How to Improve
Grow revenue with existing clients first.
Learn what interests potential buyers in your industry, and build product and revenue in those areas.
The metric: Market share
The mission: Domination – or gaining steam
The why
Growing market share indicates a path toward profitability – gaining economies of scale as it earns more business.
Market share is also a reflection of marketing effectiveness, sales success and strategy execution
How to Improve
Dig into your differentiator. It’s hard to outcompete if your offering isn’t notably different.
Invest in innovation. Acquirers want to know what measures you’re taking to stay ahead of your competition.
The metric: Operating expenses
The mission: Industry average or less
The why
Buyers use a multiple of an adjusted EBITDA to determine your business value - that's informed by your expenses.
Lowering your operating expenses will help give your ultimate valuation a boost.
How to Improve
If you haven’t already, automate tasks where possible. Finance and HR are great places to start.
Increase your inventory turnover. Stale inventory is expensive, aim to boost your turnover to at least once a month.
The metric: Debt-to-equity ratio
The mission: As low as possible
The why
A high debt-to-equity ratio can signal a company in financial distress.
If the metric is too high, your valuation may suffer – or a deal may be deemed too risky.
How to Improve
Understand what your ratio is and what debt is considered part of the calculation.
Keep in mind: Debt is a more efficient way to obtain capital compared to an equity raise. Just ensure that you’re not taking on too much as your company grows.
The metric: Profitability
The mission: Get there – or have a plan to
The why
Private companies with higher profitability than their industry peers are more likely to be acquisition targets.2
Sometimes low profitability is attractive to investors because they see potential for improvement. But it will impact your valuation.
How to Improve
Work both sides of the operating income equation – boosting sales and cutting costs.
If profitability is on a longer horizon and you're looking for acquirers, make sure you document a clear plan for getting there.
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