Disclaimer : The following post was originally published on Axial.net. Everything is an ecosystem. That’s one of the reasons everyone tells you to find a niche. They tell you to...
My story is probably much like yours.
For over twenty years, I’ve slugged it out in one of the nation’s most competitive markets. I’ve worked day and night to build the business that I have. I’ve enjoyed the ups (and even some of the downs) of owning and operating a business. It’s what motivates me. Like you, I can never stop thinking about my business. It’s always on my mind.
As part of the Baby Boomer generation, I’ve recently begun to think about what will become of my business after I’m unable to work. (I intend to work as long as I can, since I enjoy what I do.) Should I consider selling my business outright? Should I investigate transferring ownership to my children? Do I need a small business transition plan? Would one of my suppliers or competitors be interested in some type of unique arrangement? All of these questions, and many others, have been filling my head for several years now.
Have you stopped to consider what will become of your business? You won’t live forever, and you likely can’t work as long as you live. On the other hand, if someone offered you millions of dollars for full ownership, would you (or could you) hand over the keys to the entity you’ve worked so hard to grow? What would you do with your time?
In this article, I’ll offer my personal narrative of working through these very questions. In short, I’m not ready to sell my business, but I wanted to explore all of my options. Ideally, I thought it would be nice to attract some outside capital and perhaps, if I was lucky, I could also attract a talented MBA to help with operations. It didn’t work out, but I hope that you find my story helpful as you weigh your options.
Mistake #1: Partnering with a Business Broker
I’m sure there are many business brokers who are highly motivated and successful. Unfortunately, I haven’t met many of them. Open up the phone book or do an online search, and you’re bound to find dozens in your local community. At first glance, working with a broker seems like a logical (and low risk) proposition. Similar to working with a real estate agent, you typically only pay a broker if he or she is successful.
The downfall, from my perspective, of working with a business broker is twofold. First, brokers have many other businesses in their portfolio. This means you’re vying for time with someone who is likely already overworked. If your business fails to gain financing, there’s little risk from the broker’s perspective (other than the negative goodwill created with the business owner). Secondly, many of the potential buyers I encountered were looking for a very one-sided deal. I suppose most assumed that I was looking to unload my business at all costs – which couldn’t be further from the truth. Keep in mind, I was just seeking outside capital to grow my business (not sell it). For some reason, I couldn’t get this message across to brokers.
Mistake #2: Do It Yourself
After striking out with a few business brokers, I then decided to hire a freelancer to engage fellow business owners in my niche. My thought was that someone might be interested in a unique partnership. Unfortunately, as it turns out, this is a very difficult path to pursue. I had hired a really experienced sales professional to begin making calls and putting out feelers. The tricky part about this approach is that we didn’t want to reveal too much information about the opportunity. Like you, I’m pretty well connected in my industry. If competitors (or customers for that matter) got wind of this and thought I was trying to actually sell business, it may have sent the wrong signal.
After weeks of circulating somewhat veiled inquiries, I decided to put the brakes on this strategy. We had very little interest, and concerns about sending the wrong message kept popping into my mind. On to the next option.
Mistake #3: Giving Up (Well, Kind of)
I can’t say that I ever truly gave up. But, after the failures of the previous two efforts, I can’t say that I was really overly motivated, either. Sure, I still wanted to explore all of my options. However, I felt like most of my options had already been explored.
As a last ditch effort, I started researching how search funds work. In fact, I even flew to New York City in 2015 to attend the Axial Concord conference. I’m by no means an expert on search funds, but in a nutshell a search fund combines private equity with the talents of an MBA (this was exactly what I was trying to do on my own!). The search funders commission the MBA to seek a business worth investing in. If the MBA is successful at locating the business, then the private equity firm moves to acquire the target and then changes the management structure by placing the MBA at the helm.
What if Founders Could “Reverse” the Equation?
Now, granted, my business is probably not big enough to attract attention from a traditional search fund. But it got me thinking – what if a business owner like me engaged with the search funders (instead of waiting for a knock on the door)?
That’s when the light bulb moment hit me. I’m excited to officially launch ReverseSearchFund.com, an informational website for founders to collaborate and share ideas. We business owners need to stick together. In doing so, perhaps we can open up more opportunities for those of us who have built this country.
Let’s connect. I have made some interesting search fund contacts lately, and I’m happy to share them with my fellow business owners.