09 Mar A Private Equity Firm Veteran’s Advice for Business Owners Preparing to Sell
Lamar Stanley is Director at Gen Cap America, which is a lower middle market private equity firm. Stanley recently joined Business Brokerage Press for a very insightful webinar that was part of our Industry Veteran Spotlight. The webinar can be accessed here. Stanley brings years of hands-on experience to the table and has a wealth of information to share with M&A professionals. Our previous article covered some of Stanley’s insights. In this article, we will take a look at some of Stanley’s most important advice.
One key thought that Stanley shared is that he doesn’t feel that most political and regulatory leaders fully understand or appreciate the amount of risk that a private business must assume when starting a business or attempting to grow a business. He notes that quite often a policy is constructed and written with the assumption that business owners are essentially in a safe place when they have to make specific adjustment or changes to their business. However, this is obviously not always the situation. Stanley points to the ample disruption and chaos of 2020 as proof of his point.
M&A professionals should thus never forget the considerable risks that business owners take when launching or building their business. It is easy for people to lose sight of the fact that many so-called “overnight successes” are actually the result of ten or twenty years of hard thankless work. It is through these years of laser-like focus that entrepreneurs are able to bootstrap their business. Additionally, these businessowners need to not only have a vision, but also the insight to bring on great people to help build their business.
Stanley’s key advice to business owners and business brokers alike is that it is critical to for a business owner to think about selling as soon as possible. Ideally, a business owner should be thinking about selling when they start their business.
He realizes that most business owners can’t realistically hope to prepare for selling as soon as they create the business. But his point is clear, the sooner they begin the process the better.
Business brokers can best serve business owners by helping them understand that they shouldn’t wait until a month or week before they are ready to sell their business to get their respective houses in order. Of course, there are so many important factors involved in getting a business ready to sell. They range from customer concentration and diversifying suppliers to preparing financial statements and working capital estimates well in advance.
In particular, Stanley points to the danger of having business owners have to deal with preparing their business for sale while continuing to operate the business during the sales period. What must be avoided is for business owners to essentially have two jobs at the same time, as this increases the odd of deals falling apart from deal fatigue. The sooner a business broker is involved in the process, the better.