How To Prepare Your Business For The Perfect Exit Deal

“It’s important to learn from your mistakes, but it is BETTER to learn from other people’s mistakes, and it is BEST to learn from other people’s successes. It accelerates your own success. 

– Jim Rohn

Truer words have never been spoken… especially when it comes to preparing your business for a successful and profitable exit.

And isn’t that every entrepreneur’s dream? To walk away from your business with the biggest payday of your life?

My friend Joey Osborne built the Mosquito Authority franchise over a 15-year period and recently had an eight-figure payday after being acquired by a private equity firm but he says:

“What you don’t know can really hurt you.”

He lost his first 7 figure deal because he didn’t have the knowledge & tools he needed. When he finally understood the process, he positioned himself to get an 8-figure deal upfront and an even larger payday down the road in what’s known in the industry as “the second bite of the apple.” 

What is “the second bite of the apple?”

The private equity firm brings in professional management, helps the business grow, does more acquisitions, and at some point will sell the bigger business.

At that point, Joey will get paid again. 

I’ve sold 5 businesses over the last 20 years and NOT having the information & tools that I’m about to share with you cost me over $2,000,0000 in cash, not to mention the time and effort I wasted. In Joey’s case, he would have saved $100,000’s in wasted effort, and put another $3,000,000 in his pocket.

Joey says that knowing what your business is worth is just the 1st step in selling it. The hardest part is getting your business ready to sell in order to get its best value.

You don’t know – what you don’t know. 

I spent three days with Joey talking about what it takes to get acquired by a big PE firm as he did. Together we outlined “The 5 Steps to Be Acquired By Private Equity” that any founder can model.

The 5 Steps to Be Acquired By Private Equity:

  1. Is the Juice Worth the Squeeze? (Do you and your team have the right mindset?)
  • Have you considered what your life will be like after you sell?
  • Is your spouse/partner on the same page?
  • Have you considered your employees and maintained confidentiality? Your employee’s first instinct will be – “How does this affect me? The buyer will want to know the employees are staying.
  • Are you willing to take on another full-time job? (Selling to a private equity firm is like having a second full-time job until it closes.)
  • Are you willing to spend six figures getting the right due diligence?
  • Are you prepared to work hard and fast? (Keeping in mind “Time Kills Deals.”)
  1. Sizzle or Steak? (How’s your branding?)
  • Have you taken an honest look at your branding and how you appear to the public in the last six months? (The aesthetic appeal and appearance of your business matters. Does your business look like a $10mm company or does it have a $200 website?)
  • Do you have a branding guide or checklist? (Every business needs one.)
  • How are you positioned against your competitors?
  • Is your messaging and marketing working?
  • Do you and your business have a good origin story or “Big Why?” (Is it easy to tell and remember?)
  1. Warts and All (Credibility and the Believability) FYI: Private Equity buyers do NOT want you or your company to be perfect. 
  • They are looking for little things they can fix. They see those issues as being “Multipliers” – that they can profit from with their own unique skill sets and resources.
  • Part of their profit plans includes finding your company’s “warts” so they can fix them and leverage the improvements to increase their profits. Warts are good!
  • Are there skeletons in your closet the buyer needs to know about that could kill the deal or make a turnaround or 2nd sale impossible? You want to disclose them BEFORE they find them – because they will find them. It pays to be honest upfront, every business has negatives. Being honest increases trust with the buyer.
  1. Good Guts (The People / Processes / Financials / Management)
  • Are your books in order? If not, are you willing to get them fixed?
  • How frequently do you audit your books? (I learned – if your books are audited every quarter, you can close a deal in 30 days.)
  • Have you fully documented the processes (SOPs Standard Operating Procedures) of your business? The Private Equity firm is looking for ways to cut costs, improve efficiencies, and leverage assets. Your documentation not only gives them a track to run on when they take over – more importantly, it gives them clues on improving your efficiencies.
  • Do you have written agreements with key suppliers / distributors / dealers / etc.? 
  • Do you have the right management and support team in place now? (This is BIG)
  • If not – are you willing to start hiring the right people?
  1. The Buyer (Absolute MUSTs when you start talking to a buyer, plus the 2nd Bite of the Apple)
  • The buyer has to be friendly.
  • You have to like them, trust them, and feel good about them
  • Ideally, they are willing to be flexible with the buyout structure – to fit both your needs.
  • Working with your buyer is a serious relationship – just like a marriage. Especially if you stay on in any fashion, or if there’s a “claw back” option for the buyer to take back some of the money. 
  • They are intelligent and interested in making money – but not greedy. (2nd bite of apple incentive)
  • They need to give you a clear timeline and you need to understand them.

Being acquired by an equity firm is a lot of work but it’s well worth it. I’ve had five exits but no “2nd bites” like Joey. That’s simply because I wasn’t aware that this was an option and lacked the sophistication or opportunity to make it happen. 

Joey Osborne has created a Shark Tank Matchmaking system for founders and Private Equity that leads to a highly profitable exit. If you want to sell your business, Joey is your guy. Don’t leave millions on the table! Learn from our mistakes, so you can maximize your opportunity. You and your family deserve it! Watch the whole interview HERE.

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