There’s a point in time in the lifecycle of many firms where the owners believe that their business has a great future with high growth potential, however they are equally convinced that they don’t have the firepower to take it to the next level. They are not looking for an exit, but a partner who can help them take the next step up while they remain in the business long term. What does it look like when this is your driver to sell? Typical feelings when this stage is reached may be any one, or a permutation of, the following:
• I’ve reached the limits of my business leadership capability
• We can’t get into bigger clients and million dollar engagements without a big brand behind us
• Our fees could grow exponentially if we had international client access
• Lack of investment is holding us back
• I’m at the next stage of my career having built my firm and now want to reach partner level in one of the Big 4
Ideally you will read these signals well in advance of your next growth glass ceiling, because if you allow business growth to stall, then the leverage you have with buyers or investors will decrease, along with the price they are willing to pay.
It’s by no means impossible to go into a sale process with flat historic revenues and profits; acquirers know potential when they see it and the synergy value you can share together is not diminished because you lack an asset to get to the next level. However it does weaken your position because it will be clear that the potential acquirer holds most of the cards when it comes to driving growth in the next stage of the business and this will be reflected in the price paid for the business.
Whether you are still on a growth curve, or already plateaued at a reasonable size, if you have a consulting business in an area of market demand then it’s possible that a compelling business case can be put to a strategic buyer or financial investor, such as a private equity firm.
The key is timing and motivation; don’t let your firm get too far past its best by date. And if you’re fresh enough to want to carry your firm forward under new ownership, rather than take the exit door ASAP, then this may be your route to put cash in the bank as well as pump up your future compensation.
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