Why You Might Not Be Able to Sell Your Equity


By: Zane Tarence, Technology Practice Managing Director

You’ve decided you want to sell your equity. While this is an important decision, it might be a good idea to take a step back, ask yourself some questions and make sure that now is really the best time. Take an honest look at your business, and maybe involve other members of upper management to get an honest look at some of the below considerations.

1. Size, growth and share not impressive enough. When it comes to company size, your annual revenues should grow significantly each year, or they should be projected to grow. Businesses are typically more attractive to investors if they own their own market share. Document a growth plan with several initiatives and strategies. When it comes to market share, you want your business to own the highest percentage available relative to competitors.

2. Sub-par management. Your business needs a functional management team and a repeatable, definable process for operations. This is especially important when it comes to your financials. Managing assets can be just as important as how many you have.

3. Not enough margin advantage. You want your business to have gross and net margins that are greater than the industry norm. This is best achieved by continually score carding your pricing strategy and operational efficiency. Always look for more profit.

4. Barriers to entry. You don’t want it to be easy for others to enter your business market and become your competition. You have to continuously evaluate what methods you can use to build a defensible protection around your company.

5. Not enough differentiation and diversification. Offer something unique, and offer it to a wide variety of potential customers. What makes you unique will be a competitive advantage because it won’t be easy for competitors to replicate.

6. Ineffective sales and marketing of your brand. You need a well-defined, well-known brand that you are able to sell and market effectively. Do this by delivering on promises, delivering high quality products and services and being creative in your messaging to reinforce your presence in the marketplace.

7. Poor innovation. Constantly come up with new ideas for your business. This is crucial for creating an ongoing competitive advantage.

8. Less focus on customer satisfaction. Ideally, your entire customer list is your list of references. Track and use key measures to make sure customer expectations are being met in all areas.

9. Poor human resources and legal. Your business needs the ability to find and retain employees and contractors that will help you be successful, and your HR department should be skilled at doing this. You also need to be buttoned-up legally by making sure all legal matters are in order.

10. No elevator speech. A confused audience probably won’t produce many new customers. Any potential client should be able to quickly and easily understand your business, including key points about business performance, practices, culture, discipline and mission.

Founders Investment Banking (Founders) is a merger, acquisition & strategic advisory firm serving middle-market companies. Founders’ focus is on oil and gas, industrials, software, internet, digital media and healthcare companies located nationwide, as well as companies based in the Southeast across a variety of industries. Founders’ skilled professionals, proven expertise and process-based solutions help companies access growth capital, make acquisitions, and/or prepare for and execute liquidity events to achieve specific financial goals. In order to assist Founders Investment Banking with securities related transactions certain Principals are registered investment banking agents of M&A Securities Group, Inc., member FINRA/SiPC. M&A Securities Group and Founders are not affiliated entities. For more information, visit www.foundersib.com.