5 Lessons Learned in Acquisition
If you're building a brand that you'd like to sell, your business design needs to incorporate this stuff.
So you're building a brand. You're working on scaling. Chances are, you're also thinking about what a future exit could look like. (I mean, no, you don't want to run your business like you're moments from exit, but I've always been of the opinion that you need clarity on your one-day-in-the-future scheme so that you have a guiding force to drive your financial strategy and master plans.)
Having driven some solid exits, I've learned... some stuff. (She says mildly.)
Designing a brand that is saleable isn't just about hitting the right trend and some hockey stick growth. It's about designing systems and processes into the organization that enable your wins to be repeatable by an acquiring party.
I mean, trying to actually identify all of the things is next to impossible without actually digging into your business and getting some serious models going, but a lot of you have asked me if I could share top tips that you might want to be thinking about in the early stages of build.
You've got it. Without further ado, here's a snapshot of top things to consider when you're trying to build a brand that is ultimately intended for acquisition:
- Focus is everything. Often, entrepreneurs see so many opportunities, their focus dips and they try to pivot in too many directions at once. Designing a clear business strategy, applying diligent focus, and taking action against those activities every day will be a game changer for every founder-led business.
- Know your core competencies. As you build up your business, figure out what assets and skill sets are core to your valuation - and what's ancillary. Anything that will contribute to the valuation of your business needs to be your personal IP - meaning you need to deeply understand it and have the capability to run with it. For example: if a core contributor to your business's value is a highly unique design and production process, the talent responsible for developing and overseeing that should never, ever be outsourced. You may not know it out of the gate, but you must - must! - learn it to mitigate the potential risk against your valuation by figuring it out.
- Never sacrifice process. Designing a brand that is saleable isn't just about hitting the right trend and some hockey stick growth. Yes, those parts have to be happening in some way, shape, or form - but highly saleable brands have designed systems and processes into the organization that enable historic wins to be easily repeatable by an acquiring party. Efficiency is everything when it comes to scale, and your job as a creator of value is to enable that. In short: if an acquiring party can't keep that momentum going, you've probably dropped the ball.
- Stalk M&A activity. You need to understand the typical valuation multiples for your category and segment, what kind of deals are happening with what size of brands, what kind of EBIT margin is involved, who the key players are, and what trends you're able to observe. A particular knowledge of this kind of activity will give you an advantage when you're doing your growth modelling.
- Live or die by your numbers. Financial competence, strong modelling (and associated executional) capabilities, and a consistent eye on the minute quantitative details of your business is utterly (utterly!) vital to creating a brand that is worthy of sale. You can tell a powerful story about growth, scale, and opportunity when you intimately understand the financial potential of a brand and business.