It was the end of a well-received dramatic performance last Saturday night, and the audience responded with appreciative applause. The four actors came out one at a time, took their curtain call, and then joined hands for a collective bow. A man in the second row rose, applauding enthusiastically, and one by one people joined him to a point at which most of the audience was acknowledging their approval with a standing ovation.

"It was good, but I didn't think it was worth a standing O," said my artistically discerning wife, belatedly getting up to put her sweater on.

"Well, clearly we were in the minority," I responded, looking around at obviously-pleased fellow theatre-goers.

"Grade inflation," I thought to myself. "The real assessment was that it didn't get a second curtain call."

I chalked up my tepid reaction to some important pending client issues, to my preoccupation with national politics, and to my interest in the New England Patriots' drive for Super Bowl perfection the next day (ill-fated, as it turned out).

A couple of days later, I happened to run into a long-time patron and former director of the theatre company. "It had all the signs of a real winner when we scheduled it," she said of the play, "but it just didn't hit our market right. We ended up papering the house for the last few nights."

That wasn't what it looked like from the outside.

Fortunately, the bottom line for this theatre company is artistic, not financial. There are no shareholders calculating their ROI. But artistry alone doesn't usually command big returns in the business valuation process — it's how that artistry, or creativity, or innovation, or unique solution gets assessed in the market that makes the difference. Too often, discordant notes like the following limit the size and interest of the audience of potential investors or acquirers and, ultimately, your company's value:

1. The 3% Return — doesn't cut it. Your salvation may be a synergistic buyer who can reduce a lot of your overhead and thus improve your profit margin [see Bites, below], but that buyer is unlikely to pay you for the benefit of what he or she brings to the table.
2. A Limited Market — limits your reward. Without your having a Big Solution to a Big Problem that is shared by many people or businesses and evidenced by market research, there's not a lot of attraction to financing your effort to scale up.
3. Me, Too — means you're a follower. Something has to be unique. If it's not proprietary, if you lack intellectual property (copyrights, patents), you need demonstrably better marketing, or higher quality, or a lower price, or better service, or brand equity — something that creates a measureable difference from the competition.
4. It's Here Somewhere — leaves you nowhere. The investor asks: How much money do you need? What will you do with it? What happened to the last round of funding? Answer those questions without reference to notes, or don't bother to schedule the appointment.
5. The Accountant Is Working on Them — is the wrong answer to the request for financial statements. Your CFO can provide the details, but you — the owner — must know the key elements of the model and account for year-to-year variances as you lay out the financial results.
6. We Actually Did Better Than That — is always met with skepticism. Was your bottom line reduced by disproportionate bonuses or by a profit share? By cars or other perqs for you and your spouse? By revenue rolled forward to postpone taxes? Prepare a pro forma financial statement to reveal the adjusted bottom line without your tax tactics and other, one-time, expenses.
7. We're a C Corporation — means that you may be taxed twice on the gains from your company's sale, substantially reducing your proceeds. If you have no institutional investors to limit your options, consider the advantages of being an S Corporation. It can take 10 years to unravel the C Corp bind — don't wait.
8. Our Financial History Is All In Our Tax Returns — reflects unsophisticated financial management. A big step in establishing credibility with a buyer or investor comes from having consistent outside involvement in your financial reporting, at least annually. Trust is critical: start with a year-end CPA Review that conforms to GAAP.
9. Our Bank Financing Is All On Credit Cards — indicates that you're a marginal corporate credit risk and likely overpaying on interest rates. Alternatively, establishing a corporate credit line is recognition that you have achieved a higher level of credit worthiness and fiscal responsibility, important to vendors and customers alike.
10. What Budget? — means that you're trying to navigate the Swamp in the dark without a light. Financial people — the kind who might invest in you — want evidence that you manage to a plan and that achieving your bottom line is the result of a conscious, coordinated effort.

True harmony comes from being able to orchestrate all of these elements when a potential buyer comes knocking. It's then that the Fat Lady will accompany you — on key — all the way to the bank.