Despite the fairy tale that most small businesses wish to live, most small businesses are never acquired. Here’s why. Most small business owners are looking for the quick buck and not long-term value. They’re like the “first little piggy” who builds a house made of straw, and then wonders why nobody wants to buy it.
They didn’t build a home with a potential buyer in mind—one that is concerned about the big bad wolf and his propensity to huff and puff and bloooooow houses down. A company’s value is much like the value of art. Its value is in the eyes of a potential buyer. Most small business owners never understand this point and have no strategic plan to create equity.
The best decision small business owners can make is meeting with a mergers & acquisition (M&A) firm that specializes in their market niche. M&A firms are like realtors; they’re willing to invest time in educating entrepreneurs so that the entrepreneurs return to them when they need their services. It’s important to meet with a respected M&A firm early to better understand your potential buyers and create equity for your company.
From personal experience, the M&A firm I met with showed me the various types of potential buyers in my industry and what they were looking for in an acquisition candidate. This information became the foundation of my strategic plan. I now had a target, actually multiple targets for multiple types of buyers, to aim for. I directed the growth and maturation of my company to match the needs of potential buyers.
I hit multiple targets along my journey. However, in 2016, I hit a target that increased the value of my company to a point where I could easily provide for my family for the rest of our lives, so I cashed out and sold. If I were a teacher holding a test review, I’d be stomping my foot right now. Start tracking the M&A market to see what potential buyers are looking for!