We received an average offer for our company, but I think we can get a higher valuation if we wait two years and upgrade our technology. How should I calculate this trade-off?

Question

Tyler Smith · Accepted Answer

When deciding whether to accept an average offer now or wait to upgrade your business for a higher valuation, you are dealing with strategic real options. Every year you wait to sell carries a flow cost. This includes the risk of market downturns, industry disruption, and the personal energy you must expend to run the business. To make an objective decision, you must calculate the hidden costs of upgrading your operations. Will upgrading your technology require significant capital and management distraction? If so, the projected increase in valuation must comfortably exceed these costs plus the flow cost of your time. Use your V/TO® to map out the strategic milestones required for this upgrade. If your leadership team is fully capable of executing these upgrades while you step back, waiting might make sense. However, if executing this upgrade requires you to jump back into the daily operations, you are increasing your key person risk. Sometimes the bird in the hand is worth more when you factor in the peace of mind of a clean exit today.