Selling your business: What private equity and trade buyers really want

There is a lot of talk about selling businesses at the moment. Private equity roll-ups, consolidations, management buyouts. You may have read about record valuations in your sector. But the reality is that not every business is ready to sell. Many are far from it.

When I speak to business owners about exit planning, I often ask a simple question:

“Would someone pay good money for your business if you weren’t there tomorrow?”

For far too many, the honest answer is no.

If your business depends on you, your relationships, your decisions, your expertise, it is not really a business. It is a job with overheads. Buyers recognise this immediately.

In Episode 3 of Making Your Business Less Dependent on You, I explain what really happens when you sell to a third party. That could be a competitor, a larger PLC, or a private equity fund.

Private equity deals often follow a common pattern. They buy 75 per cent of your business and leave you with 25 per cent. You may be asked to stay on for a few years. Then they roll up similar companies in the same industry, streamline costs, raise prices and eventually sell the consolidated business for a higher multiple.

If everything goes well, you could have two opportunities to benefit from the sale. If not, you could end up disappointed.

Trade buyers, such as PLCs, often pay more, sometimes eight to ten times profits, because they operate at higher multiples themselves. But they will only pay that if your business can function without you. Being able to step away is essential.

Whether your exit is five years away or fifteen, preparation has to start now.

The key steps are simple but essential:

• Build systems that allow your business to operate independently

• Develop a leadership team that can make decisions without you

• Make yourself replaceable

This is not just about creating value. It is about creating freedom for you and your business.

If you want to understand how buyers value your business, start making your business less dependent on you, and prepare for an exit that rewards all your hard work, you can download my free book or arrange a one-to-one chat with our team at A4G.

The best time to prepare your business for sale is not when you are ready to leave. It is now.

Download my book, Making Your Business Less Dependent on You, for free
Book a call with A4G