Noise is defined as “sound that is loud, unpleasant, unexpected or undesired”. In a business context it means something or a series of things going on around the business that distracts everyone from accomplishing goals and objectives.
We often refer to our roles at Beacon as being story tellers. The more effectively and efficiently we can tell a potential buyer the company’s story the better chance there is of generating an offer from that buyer. Noise detracts from our ability to tell the story.
If the answer to every question a buyer asks has a complicated five-minute explanation, they lose interest quickly. If your business valuation assumes that a $50,000 expense four years ago is not likely to be repeated, than buyers will likely listen. If there is a story about a different “one time” $50,000 expense every year, that is too much noise.
Businesses have challenges and some of them require a long explanation. I had a client many years ago who seemed to move from one challenge to another almost every year. His CPA once proclaimed “this company solves its problems and never makes the same mistake twice.” To which their lawyer responded, “True, but it is amazing how they are able to find new ways to mess up every year.”
Buyer: Why did sales decline in 2012?
Buyer: Why are professional fees $50,000 higher in 2011?
Owner: Good question
Buyer: Why did the top salesperson leave?
Owner: Long story……
Buyer: Why does this customer get a special discount
Owner: Let me explain……
If the answers to questions like this take longer than a few sentences to explain and lead to more questions, there is too much noise.
The best time to sell a company is when it is functioning well and free of distractions. Sometimes the best cure for excess noise is time.