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Thinking Like a Buyer When Building Your Business

By Generational Equity

Think Money

Here is an interesting concept and one that we emphasize heavily to business owners who attend our exit planning conferences: begin the process of building a buyer-ready business the day you open your doors.

Now most business owners are justifiably proud of the company they have created through hard work, dedication, and perseverance. However, building a buyer-ready business is sometimes quite different to simply building a business. And building one that is tailored with buyers in mind requires a strategic vision of what professional buyers are looking for when they make acquisitions.

The idea behind this concept was confirmed recently in an article published by Axial entitled, “Build Your Business With Your Buyer in Mind.” Here is how the idea was described by Axial:

CEOs who have never sold a company before often take for granted that if they just focus on building value in their business, the rest will sort itself out. But even the shrewdest, most successful owner-operators can fail to realize this value if they are underprepared for the unavoidable eventuality of any business — an exit.

Regardless of whether a sale is in the immediate horizon or several years down the road, start thinking of your eventual acquirer as a discrete entity for whom they are building value.

There is an old saying in our industry that goes something like this – there are two types of business owners:

  • Those that plan their exit
  • Those that have to exit

Those in the first group will generally reap greater rewards than those in the second. Where do you find yourself in your exit planning process? Are you planning to create a business that buyers will find attractive, or are you hoping that you can avoid one of the Big Ds for as long as possible (Death, Disability, Divorce, Disinterest and Disagreement)?

Why This Matters

Assuming you realize the importance of planning for an exit from the outset and creating a buyer-ready company, the real challenge is this: if you have never acquired a business before, how on earth can you even begin to think like a buyer will about your business? That is why we meet with as many business owners as we can because the reality is we have the experience and knowledge about what buyers look for in companies; our background allows us to help our clients to create buyer-ready businesses. This is again how Axial describes the situation:

Many will stress the importance of engaging advisors and bankers early in the process for information on what other buyers and sellers are doing. Of course, the more intel you have, the better. But there’s another reason to strike up relationships with bankers in your space.

Helping intermediaries understand the nuances of the industry and allowing them some insight into how you are managing to take advantage of them will make it more likely that your company comes up during their conversations with other buyers and sellers in your market. The more you are talked about, the better: you never know what will pique a potential acquirer’s interest.

I mildly disagree with this last sentence above. A qualified, experienced dealmaker will know exactly what features of your business will “pique” a buyer’s interest. It is the process of first getting to know your company and its unique traits (every business has these); then formulating an understanding of your personal financial goals; and finally helping you to build value into your business that will reduce risk associated with it in the eyes of buyers.

This truly is how you build value: reduce the perceived risk in your business. And I will go one further and let you in on what areas of risk buyers are usually most concerned about:

  • Customer concentration – having a single client generate more than 20% of your revenue
  • Excessive owner dependence – too many decisions are centralized and made by the owner and/or most client relationships are based on owner contacts
  • Lack of recurring revenue – building revenue every year from scratch

If you can begin to focus on these key areas, you will be well on the road to building a buyer-ready business. Interested in learning more? Attending a Generational Equity exit planning conference is the next step. For more information, follow these links:

Carl Doerksen is the Director of Corporate Development at Generational Equity.

© 2021 Generational Equity, LLC. All Rights Reserved.

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T.D., thank you so much! You are a great leader! I love how you are using your gifts and talents to better others. You are clearly a GREAT COACH! This 3 day session undoubtedly changed the future of our business, and very well may have been the sole catalyst to save my company, my health and my marriage! A genuine “thank you” from the bottom of my heart.
Bryan D. Horn, Owner, Over Under Clothing
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.
Bil MacLeslie, CEO, ipHouse
Greetings Mike. Thank you for the captivating and compelling presentation you made at the Phoenix presentation last week. Over many years in business yours was the most informative and well-presented presentation, on any subject, that I have ever attended! Your energy and enthusiasm combined with your concise and captivating support of your positions with easily understood examples and data was compelling.
Pete L.
I must say that I have never worked with a more driven, competent and focused individual as Don Ho.
Jay Dinnison, Owner of Sharpe Mixers
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.
Ralph Noblin, President of Noblin & Associates
I quickly recognized that Don was working for Sharpe Mixers above all else, and held our interests above others.
Jay Dinnison, Owner of Sharpe Mixers
I couldn’t have asked for a better team than Michael and Deborah. We couldn’t have done it without them.
Robert Evans, President and CEO of Mealtracker Dietary Software
I am pleased that I was able to work with Andrew Byrd throughout this experience. From the first meeting we had in Minneapolis I felt that I was in good hands. His knowledge and expertise is second to none. He guided the process consistently throughout. I feel lucky that I was pared with Andrew and could not be happier that I chose Generational Equity to handle this major life event. Thank you Andrew and GenEq for everything!
Eric Erlandson, Owner, Action Fastenings, Inc.
I need to say an immense thank you to Don Ho for his stellar work ethic, attention to detail, and tireless effort. Also thank you to the whole crew at GE! Without you, Don could not do such a phenomenal job. We were shooting for closing and funding before the end of 2020, due to the uncertainty of the political landscape and taxes. I am happy to report we closed last week and will be funding tomorrow.
Dr. Caty J. Catron PhD, RN, VA-BC – Owner, Vic The Picc, LLC
We will highly recommend Generational Equity and Musa Jagne to any business owner about to embark on the same process.
Karen S. Williams, CFO, BW Manufacturing
We knew it would be a difficult task to have someone really understand our business and our market, prior to researching a possible buyer, so it was imperative that we found someone of your caliber, with definite proven experience in this area.
Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
We are extremely pleased with the way Generational Equity handled the sale of our company. Your associates, Tom and Chris, did an outstanding job of getting us (me) through the process.
Michael J Polarek, President, Paragon Packaging
The help you provided us during each step of this process made us feel very comfortable and confident we were selecting the right approach to transition our Company.
Andy Graham, Vice President, Modern Heating & Plumbing
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).
Bil MacLeslie, CEO, ipHouse
Tom Staszak is one of the most professional people I have dealt with in my last forty years of business. You’ve got a great group of people and you have built a truly professional organization.
Michael J Polarek, President, Paragon Packaging
Generational Equity’s assistance was invaluable in compiling and marketing our business.
Bil MacLeslie, CEO, ipHouse
Thank you again for all your guidance and support. Any company will achieve what they intend, if they have you on their team!
Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
We thank you Eric and Generational Equity making our dream come true.
Larry Moore, Owner, A Company Portable Restrooms
Bruce and I wanted to take this opportunity to thank Generational Equity for assigning Musa Jagne to our transaction. In Bruce’s words, “Musa did one hell of a job for us!”
Karen S. Williams, CFO, BW Manufacturing
Michael worked tirelessly, He followed every lead meticulously and urgently to make sure nothing was missed.
Robert Evans, President and CEO of Mealtracker Dietary Software
We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.
Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
I wanted to write you a quick letter to express our appreciation and our delight on the outcome of helping us through the process of our recent sale. We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.
Terry D. Wickman, President, Keytroller
We were happy to see the interest in our company and what we cherished has not just a valuable company but an important company to the communities we served in.
Larry Moore, Owner, A Company Portable Restrooms
Thanks again Phil and feel free to have a future client call me if they would like a referral. You are a true professional!
Andy Graham, Vice President, Modern Heating & Plumbing
Dear Chris and Andre, I just wanted to say thanks for all your help. Even though this process was not an easy one, it was comforting to know that I had a capable team standing beside me. You made me feel like we were almost your only client or at least the most important one. Thanks again, and I will recommend your service in the future.
Shenille Engelhart, Owner – CLS Technology
The process was much more involved than I expected and your help, experience and advice was a big factor in making the negotiations go as smoothly as possible.
Terry D. Wickman, President, Keytroller