Why PE Might Be Your Business's Next Chapter
Welcome back to the Mid Market Insider!
Let’s jump in…
This week I want to dive into why private equity may be an option to consider when selling your business.
Now I will preface this as being as unbiased as possible. I’m not going to say it’s the best option but it is an option to consider.
Reaching the point where you can sell your business is no small feat. It’s a milestone that surprisingly few people actually reach.
To put it in perspective approximately 34.7% of businesses in the USA survive to reach the 10-year mark.
This means around one-third of businesses created in a year are still operating 10 years later.
In short, the odds are stacked against you.
But choosing a buyer is the next logical step especially if you no longer have the drive to grow your business. Now of course there are a lot of options but let me break down why PE may be your best bet.
Now I can’t make this clear enough. This is the most important decision you will make for your business. If you have been following my newsletter or LinkedIn you know how important it is to have a succession plan in place. And so an equal amount of importance should be placed on finding your next buyer.
Now let’s explore the reasons as to why you would consider PE.
1. PE firms are built on closing deals
Folks who work at PE firms don’t get to keep their jobs if they don’t close deals.
Working with a motivated buyer is integral to making the process as smooth as possible.
2. Platform deals maintain their identities
Some people don’t care if their companies are swallowed up by bigger brands or even stripped and sold for parts. I mean once they sell their business why would they care?
But for those who do care, a platform investment will mean your company will be leading the charge. So having the peace of mind knowing they will work hard to keep the business and brand as strong as possible is a nice addition.
3. PE wants to grow businesses
One commonality amongst most PE firms is the appetite for growth. Now the appetite may vary across different firms but overall it's a big focus.
Now this is ideal for business owners who want to grow their business but they don’t want to foot the bill or take on too much risk. Or if business owners are closer to retirement, and find themselves shifting to a more preservation mindset, the last thing you want to do is throw capital around to pursue growth.
If you sell to a PE firm their risk appetite will be exponentially higher.
4. Resources
Depending on the firm you work with, PE firms offer several other non-financial benefits such as operational improvement practices. PE groups often invest in tools and systems that streamline processes and boost efficiency.
5. Talent Acquisition and development
Working with PE firms can help you attract and retain top talent that are well equipped to tackle your ambitious plans
There you have it - the PE playbook laid out.
Remember, this isn't about pushing you toward private equity, but rather expanding your perspective on what's possible when you're ready to pass the torch.
Your business journey has already beaten the odds by making it this far.
The next step deserves just as much careful consideration.
The Lessons:
1. Success Itself Is an Achievement Worth Protecting: The fact that only 34.7% of businesses survive to the 10-year mark emphasizes that reaching the point of being able to sell is already a remarkable achievement.
2. Due Diligence Goes Both Ways: While PE firms are known for their thorough evaluation of acquisition targets, sellers should be equally diligent. Understanding what different PE firms offer beyond capital - from operational expertise to talent development - is crucial for finding the right fit for your business's future.
3. Growth Without Personal Risk: PE partnerships can offer a middle ground for business owners: enabling company growth without requiring the original owner to.
📅 Next Week:
In next week's newsletter, we will discuss the importance of having a strategic approach when looking to exit your business.
Keep building,
Nick
P.S.
If you want to hear more from ‘The Most Boring Guy In Private Equity’, follow me on LinkedIn and YouTube. I dive into the world of private equity, share some tips and tricks for small business owners, and most importantly, share my industry knowledge.
Make sure to follow me so you don’t miss out!
If you want to discuss your business goals in greater detail book a discovery call: https://calendly.com/nickmclean/discovery-call.
Just remember, this won’t cost you a dime and you get what you pay for :)
I just launched a podcast, Ambition with Nick!
Links can be found here:
Apple
LinkedIn: Nick McLean
YouTube: NickFourPillars
