It’s important in the early stages of building your company that you think about these questions. Planning in detail can make a considerable difference to your value. Below are some tips on who and why someone would want to buy your company. Obviously this will depend on your final exit route, but the earlier you start formulating the vision the better.
One popular route is a management buyout (MBO). In this case, you need to ensure that you have the strength and appetite within your management structure to make this happen. Have solid foundations early on so your people grow in line with the company. Remember, the key people must be able to run the company in your absence.
The route I took was via a market alliance. We sold financial services products. It appeared from an early stage that our likely acquirer was going to be an insurer or lender. If this is your likely route, it is vital that you continue to add value to their company, above and beyond anyone else they receive business from. Ensure you develop exceptional working relationships with the directors of those companies. Make sure they clearly see your company stands out from the competition.
Some companies adopt a strategy of growth by acquiring or merging with similar businesses. This is a really popular route, but you need to ensure that you have the infrastructure and skillset to gel the new companies together. Then you can continue to achieve good results with minimal disruption.
Sometimes you get a scenario where an international company may want to expand into a new area, and this is their easiest/cheapest route to do this. It may also be that by merging, they are diversifying into new areas of business where they have not been before.
You might be supplying them with goods/services they’d be lost without. They may feel their added value will help your business grow, providing it’s ultimately scalable. To be honest, unless your business is scalable, there’s a poor chance anyone will purchase. Your product and service may be the same or similar to those of your potential acquirer. A good example would be a mortgage broker being acquired by an IFA.
Some businesses have a robust infrastructure and distribution network other businesses feel they could benefit from. Basically, they have great people at all levels. More or less any related product could be dropped into their portfolio and dealt with proficiently. A good example would be a personal lines insurance broker. If you were to add an income protection product, it would be added to their portfolio without issues. For a company who wanted to “buy” distribution, this would be a worthwhile strategy.
A vitally important option is having a brand everyone respects and immediately wants to be a part of. It represents everything a purchaser would like to see. Think of the high street names that have brand excellence. John Lewis is a good current example. You may provide the route for the acquirer to diversify their product range, or it may indeed complement their existing range.
They may have several options on companies to acquire, but yours stands out from the crowd. You run your SME like a corporation. You have achieved consistent growth year on year. You developed good relationships with the directors, which makes them feel comfortable with each transaction.
Having built and sold my SME, I now work with SMEs. I understand their model by embedding myself in the senior management team so I feel the heartbeat of the business. All areas are covered, but the four questions that we work on solving are: How do I grow my business?, How do I achieve client excellence?, How do I make more profit?, and Does my business model deliver?
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