It took me 20 years to sell my business to private equity. But the truth is, for the first 15 years, I didn’t know how to build a company that was even close to being investable. I was focused on running the day-to-day operations and constantly putting out fires, but I didn’t realize that selling to private equity requires a level of sophistication I just didn’t have back then.
In those early years, I was like many other founders—chasing growth without a clear strategy, doing whatever it took to keep the business afloat, and focusing more on survival than on building long-term value. That all changed after a crucial conversation with a banker that opened my eyes to the hard truth.
The Conversation That Changed Everything
I remember sitting down with a banker who bluntly told me, “Luke, your margins are too low. For your industry, they need to be above 10%. That shows strength and signals that you have a desirable brand.” It wasn’t just about cutting costs or increasing prices; it was about demonstrating to potential investors that my company had long-term value.
That same banker also gave me another hard truth: I needed to make myself irrelevant. If the company relied too much on me as the founder, no buyer would be interested. I had to build a management team that could run the business without me, reduce customer concentration, and de-risk the business in every way possible.
These were things I had never considered. Up until then, I had been the cornerstone of the business, making all the major decisions, managing key customer relationships, and overseeing operations. But the more dependent a company is on the founder, the less valuable it becomes to potential investors.
The 5-Year Transformation
With these insights in hand, I realized I had a lot of work to do. Over the next five years, I went to work fixing all the gaps that had been holding the business back from being investable:
- New Management Team: I recruited talented leaders who could run day-to-day operations without my involvement. This was a huge shift for me, but it was essential for the company’s long-term growth.
- ERP and Financial Systems: We implemented a new ERP system and upgraded our financial reporting processes, ensuring we had accurate, real-time data that could stand up to scrutiny.
- Audited Financials: I knew we needed audited financials to appeal to serious buyers, so we partnered with a top-tier accounting firm to make sure our books were in order.
- New Bank Relationships: I strengthened our banking relationships, ensuring we had access to the capital we needed to fuel growth and navigate any downturns.
- Sales and Margin Growth: We refocused our sales efforts to target higher-margin opportunities, which not only improved profitability but also made the business more attractive to investors.
- Building a Strong Brand: We invested heavily in marketing and engaged with influencers in our industry to build brand recognition. A strong brand is one of the most important assets when selling to PE.
- Process and Systems: We formalized our business processes, creating a scalable, repeatable system that was no longer dependent on any single person, including me.
The Results
All of this could have been done years earlier. In fact, if I had started this transformation sooner, my life would have been much less chaotic, and the business would have been far more enjoyable to run. But the important thing is that we did it. After five years of intense focus and planning, we sold to private equity in a deal that was the culmination of all that work.
The sale was the payoff for years of hard lessons learned, adjustments made, and new systems built. It was proof that a business can be transformed if you’re willing to put in the time and effort to make it happen.
You Don’t Have to Make the Same Mistakes
I made all the mistakes, but the good news is, you don’t have to. Transforming a business to be investable might sound overwhelming—it might even feel like too big of a mountain to climb. But the truth is, with the right plan and the right guidance, it can be done more efficiently than you think.
Whether it’s building a leadership team, improving margins, or making your business less dependent on you, these steps are critical if you want to position your company for a successful exit.
And the best part? You don’t have to do it alone. All you need is a guide to help you navigate the journey and make it easier.
If you’re ready to start building an investable business, let’s talk.
