Earlier this summer, our Managing Principal Kara Gibson Brzytwa met with Brittany Gautreau at Clarity Capital Partners to discuss everything from women in entrepreneurship, the benefits of buying an established business versus starting one from scratch, and a few of our favorite strategies to prepare a privately held business for sale. Exit Planning is critical, whether you own a small construction business or a middle market software as a service business, so we love to work with financial advisors, CPAs, and attorneys to form a trusted team of advisors business owners can lean on when they start planning the next generation of their business.
Benefits of Buying an Established Business
It is incredibly difficult to start a business. You never know if you truly have a product-market fit, which makes cashflow difficult, especially if you are a recent grad or just starting a family. The silver tsunami is coming, and we expect a large influx of baby boomer born businesses coming to market in the next ten years. Enter: Entrepreneurship through Acquisition. 98% of our buyers are men–we want to raise awareness about acquisition entrepreneurship to women, so more women jump into the world of acquisition entrepreneurship (listen in at the 5 minute 10 second mark!)
A huge benefit of buying an established business that has been running for years, is that on day one, a new owner will be getting paid! Cash flow of the business can be used to pay the owner, and pay off the bank loans (or seller loans). There are established team members in the business, established processes, and a Seller that is standing in the wings helping get you set up for success. Does this help paint a picture of why Acquisition Entrepreneurship is better than just plain old Entrepreneurship?
Favorite Strategies for Preparing a Business for Sale
While Kara had too many favorite clients to pick just one to speak about, we are so grateful to have assisted one of Clarity Capital Partners’ clients succeed in exit planning and ultimately a successful company sale. Why was this transaction a successful one? The owners were planful, and initiated the sales process long before they were truly ready to be finished with the business. This timing and planning allowed this specialty consulting firm to sell to a larger firm that was seeking to add specific expertise to its portfolio.
Any business owner should have an idea–long before they are thinking of selling–to understand what transferrable value their business has. The most direct way to understand this is to get business valuation done 5-10 years before a business owner is contemplating a sale.
Want to learn more about business valuations?
By getting a quantitative idea of what your business is worth, this can help shape the final years of business ownership: There will be identified value drivers, tactics and plans that can help increase your business value–and maximize the amount you get at exit. In addition, this can help make the smoothest transition for employees–usually the primary concerns of business owner that runs a services business.