What a Business Coach Adds in the Years Before a Sale

A performance coach is an outside advisor who works with an owner and leadership team on a set schedule to set goals, build the plan to reach them, and hold the team accountable to the results. Many owners bring in a coach to run the business better. Fewer realize how much that same work is worth when the time comes to sell. When an owner has already been working with a coach, the story behind the numbers usually exists before a buyer ever asks for it.

Why Buyers Trust Coached Numbers

A buyer is paying for the future. The numbers are the numbers, but the buyer is buying the future of the people who generate them, and whether those people will keep doing it after the sale.

That puts weight on projections. Every seller presents a forecast. Most buyers discount it, because a projection is only a projection until it has been checked against actual results over time. An owner who has worked with a coach can often show budgets and projections set in past years next to the actual results that followed. When those line up, the forecast in front of the buyer carries far more credibility.

That history strengthens the confidential information memorandum shared with buyers during a sale. It gives the owner a way to put money behind their words. The same history helps in diligence, when buyers test the forecast against what the business has done before, and alongside the financial ratios buyers review before a sale.

A Coach Can Explain the Off Year

Every business has a year that does not fit the pattern. Margins dip, or a new initiative costs more than expected, or a key hire takes longer to pay off.

A coach who was in the room can help the owner walk a buyer through that year: the strategy the team tried, when it started hurting margins, and how quickly they adjusted. That explanation turns a question mark into evidence of a team that manages itself well. Buyers know no business runs without setbacks. What they want to see is a team that notices problems and responds.

Coaches tend to know the history and the dynamics of a company better than almost any other outside advisor. Many owners count their coach among their most trusted advisors, and that knowledge of the company's history is useful well beyond the regular sessions. Many coaches have owned or sold businesses themselves, so they can also speak to what an owner is feeling as a sale gets close.

Coaches and the Plan for Key People

Owners often come to us wanting to reward key people because there is pressure from below. The team has asked what is in it for them. The owner has said they will figure something out. Over time the pressure builds, and by the time we are introduced, the owner wants a plan written and in place quickly.

We can do that. First, though, we want to understand what the owner wants. Are you building the company to sell in a few years? Stepping back from the day-to-day operations? Handing more of it to the team? Those answers decide the design: the payment events, the size of the awards, and the timing. They also let the plan include a change of control provision tied to the owner's timeline, so the people who help build value share in it whether the eventual buyer is the management team or an outside firm.

A coach adds to this in three ways:

• Setting the targets. A coach who knows the strategic plan can help set performance targets for the years leading up to a sale, so the plan rewards the results that build value.
• Running the plan. A coach can help administer the plan and review progress against it with the leadership team.
• Explaining it. A coach can help participants see how their daily work connects to the value of the business.

Plans also work better when they tell a clear story. The owner can say to the team: "Here is my goal. Help me reach it, and here is what I am prepared to do for you." The owner's side of that conversation starts with the questions to answer before designing an equity plan.

A Score That Shows Progress

Owners and coaches both benefit from a way to show that the work is paying off. Our Transferable Value Index is twelve questions, and each one points to an area that affects what a business is worth to a buyer. Taken on a set schedule, whether quarterly, twice a year, or annually, it gives an objective score to track.

Picture a company that scores 55 in its first year, then 65, then 69, then 72, and then 77. An owner can share that trend with the team as evidence that their effort is building value. It also tells the owner and coach where to focus next. A business where the owner has delegated the key relationships but everyone still does things their own way, for example, might spend the next year building consistent systems and processes.

The pattern we see in the Index's first published finding, the order in which owners let go, is a useful starting point for that conversation with a coach.

The Rest of the Advisor Bench

A coach is one member of the team an owner needs around them as a sale approaches. Each plays a specific role:

• Corporate and M&A counsel to structure and negotiate the transaction.
• An employment or benefits specialist who knows the rules that govern incentive and deferred compensation plans, such as ERISA and 409A.
• A CPA whose financial statements will hold up to a quality of earnings review.
• Wealth and investment advisors who help the owner plan for life after the sale.

The value of the bench comes from coordination. The value of the bench comes from coordination. A shared understanding of what the owner wants lets the coach, the CPA, and the attorney build on each other's work, and keeps the owner from becoming the go-between. That coordination is the heart of exit planning for closely held businesses.

What to Look for in the Advisor Who Runs the Sale

Owners often ask us what to look for in a firm to sell their business. Our answer starts with trust. You want a partner who cares about the outcome and about your people, beyond the fee. Expertise in the process is necessary, and most qualified advisors have it. The difference is whether they take the time to understand what you want for yourself, your family, and your team.

Industry experience helps with the buyer list and with the nuances of certain fields, such as licensing or labor rules. The buyer pool is often wider than the industry itself, because private equity firms building platforms look at companies across many industries, and a good advisor can reach them. How the advisor runs the process, and how well they understand your goals, usually decides the engagement. A company that has been developing leaders ahead of succession gives that advisor more to work with.

Questions to Take to Your Coach Now

If you already work with a coach, a few questions will show how much of the groundwork for a sale is already in place:

• Are our budgets and projections written down each year, next to the actual results? That record is what turns a forecast into evidence.
• Which parts of the business still depend on the owner? Decisions about where the business goes next, and any relationships the owner still carries personally, are the usual places to look.
• Do our key people understand how their work connects to the value of the company? If they do not, an incentive plan is harder to connect to the results that build value.
• What is the plan for the year the numbers come in soft? The explanation is easier to build at the time than to reconstruct years later.
• Who else should see our plan? The CPA and attorney work better from the same picture the coach has.

None of these require a decision to sell. They are the habits of a well-run company, and they happen to be the same things a buyer will ask about.

When to Bring the Coach Into the Conversation

The best time is years before a sale, when the coach can help shape the targets, the plan for key people, and the record of results that buyers will later read. If you already work with a coach, include them early. If you are deciding when to start planning, regular work with a coach is one of the easiest ways to build the history a buyer will want to see. Our exit planning resource kit is another place to start.

We discussed this on an episode of our podcast, What Transfers.