In the business world, we often chase after growth like it’s the holy grail. Entrepreneurs boast about their team size, and many dream of skyrocketing revenue figures. But here’s the kicker: if you’re eyeing a sale to a strategic buyer down the road, simply growing your revenue may not cut it. In fact, it could even hurt your company’s value.
Strategic buyers, the ones who usually offer the juiciest deals, aren’t just after any old business. They’re hunting for something unique, something they can’t easily replicate. The more stuff you pile onto your plate, the less attractive you become to them. Let me give you an example. Take Michael Lieberman, who started a software company called Datastay. They shook up the brake manufacturing scene with their game-changing product lifecycle management software. Datastay became the go-to for brake companies, and Michael was practically a legend in the industry.
Then along came Autodesk, a big player in the software world. They saw Datastay as their ticket into the product lifecycle management market and recognized its dominance in brakes. They wanted in. So, what did Autodesk do? They offered Michael a jaw-dropping deal—ten times his company’s revenue, despite having just nine employees. Now, here’s the twist: if Michael had chased after every dollar, he might have lost sight of what made Datastay so special. But he didn’t. He stayed laser-focused on serving the brake industry with top-notch software. Sure, he could’ve expanded into other areas, but that would’ve watered down Datastay’s appeal. Instead, he kept doing what he did best: making kick-ass software for brakes.
Here’s the thing: when it comes to selling your business, private equity and strategic buyers play by different rules. Private equity folks crunch numbers like EBITDA multiples, but strategic buyers? They’re sizing up what your business brings to the table for them. They’re not interested in your jack-of-all-trades act. They want the one thing you do better than anyone else. And the more focused you are, the bigger the paycheck they’re willing to write.
I help entrepreneurs buy and sell remarkable businesses as well as help them plan their exits. If you would like to learn more about how much your company is worth and/or how to maximize the value of your business at exit, Click Here to schedule an introductory call with me or feel free to email me dave.godwin@cbiteam.com. I will help you discover how to find out if it’s the right time to exit and help you ask a higher selling price for your business. All information is managed in the strictest of confidentiality.
