Selling a Business

The Challenges of Growing a Business To Make It Buyer Ready

Ed Hess, professor of business administration and Batten Executive-in-Residence at University of Virginia’s Darden School of Business, published a book titled Growing an Entrepreneurial Business: Concepts & Cases. In the book, Professor Hess describes the challenges of growing an “entrepreneurial business." We have our own term for such a business, though the concepts are similar. We call it becoming "buyer ready", a prerequisite for selling a business, and there are two specific areas in which we concur with Professor Hess’ findings.

First, a buyer ready middle-market business will be adept at managing the challenges of growth. These challenges include finding qualified people, retaining them, obtaining financing, expanding the customer base, and doing all of this while making money, among many others. A business owner can never reach the point of selling a business, at least not for maximum potential value, without learning to navigate these challenges effectively.

Second, and perhaps even more important, the founder/owner of the business must transition to becoming a professional manger and ultimately a leader. This can be a very difficult transition for entrepreneurs to make because the skills needed to get a business off the ground are often quite different from the skills needed to lead a $30 million enterprise. The need to develop an effective middle-management team is a must, and is in fact one of the most important steps in managing the challenges of growth.

Click to download our whitepaper "Building and Exiting A Desirable Business" by Generational Equity president Ryan Binkley.

Deal Structure Flexibility A Key to Selling a Business

When selling a business, most middle-market business owners want to receive 100% of the purchase price for their companies in cash. Although every dealmaker would love to guarantee this, the reality is most deals close with a combination of cash, notes, stock, consulting agreements, and/or earn-outs.

The key to successfully selling a business is often dependent upon the flexibility of the seller when it comes to deal structure. If a business owner is dead set against anything other than an all cash deal, chances are good he or she will have difficulty selling the company; or if they do, the amount paid could be considerably less than what might have been earned with more flexible deal structuring.

The key is for business owners to keep an open mind as they negotiate the sale of their business. If using an M&A advisor, they can provide guidance on the various ways that a sale can be structured with the goal of negotiating the best deal and the best deal structure possible.

If you are considering selling your business or simply interested in how to grow your business for maximum value upon a future exit, our conference can assist you in understanding and demystifying the M&A process and the options that may be available to you. Please call 972-481-2801 from the hours of 8:00 am to 5:00 pm CST to determine if your business qualifies to attend the conference, complete your registration and answer any questions you may have.