When we reach out to prospective clients about mergers and acquisitions (M&A), one of the most common responses we get is: "We're far too early to be thinking about M&A." While understandable, this mindset may be missing an essential element of strategic business growth—starting at the end.
For founders, CEOs, and business owners, envisioning the ultimate goal of their company should be one of the earliest steps in their journey. In fact, the most successful entrepreneurs build their business with the end in mind. Whether that end is an acquisition, IPO, or a legacy business handed down through generations, clarity on this vision shapes the decisions that will follow.
Here’s why you should start thinking about your exit strategy far earlier than you might think, and how to reverse-engineer a plan for getting there.
Start at the End: What Does the Future Look Like?
Every business owner should have a clear vision of what they want their company to look like in 5, 10, or 20 years. Without this, it’s easy to get caught up in the day-to-day grind and lose sight of what you’re really working towards. The big question is: What’s your endgame?
If your goal is to sell the business one day, several questions naturally follow:
Who do you want to sell to? A larger competitor, a private equity firm, or maybe a strategic acquirer within your industry?
How much do you want to sell for? Setting a target valuation early allows you to reverse-engineer the steps to reach it.
What role do you want to play post-sale? Do you plan to exit entirely or roll some equity and remain involved?
Defining the ultimate goal helps create a roadmap for your company’s growth. It becomes much easier to make decisions about products, revenue models, customer acquisition, and even operational structure if you know where you want to end up.
Work Backwards to Build a Path
Once you’ve outlined what your future sale (or exit) looks like, it’s time to work backwards to build a plan to get there. Here’s how you can break it down:
Revenue Growth Targets
How big does your business need to be by the time you plan to exit? Set realistic, phased growth targets based on your market, competition, and resources. Consider the types of revenue streams that will be most appealing to future buyers—recurring, reoccurring, and project-based revenues all have different values in an M&A context. Buyers often prefer predictable, recurring revenue streams, so your growth strategy should focus on building them up.
Customer Concentration and Market Diversification
A buyer will look closely at your customer base. High customer concentration—relying on just a few big clients for the majority of revenue—can scare off potential acquirers. A well-diversified customer portfolio, with no single client representing more than 10-15% of your revenue, is a strong selling point. Building towards this should be part of your strategic plan.
Unique Selling Propositions (USPs) and Market Positioning
What will make your company stand out to buyers? Whether it’s intellectual property, a loyal customer base, or a distinctive market niche, it’s critical to identify and strengthen your unique selling points (USPs). Your company’s competitive advantages will play a key role in how attractive you are to potential acquirers. Consistently refining and protecting these USPs can boost valuation significantly.
Operational Efficiency and Scalability
Buyers will want to see that your business is scalable, and systems are in place for smooth operations without requiring your day-to-day involvement. If you’re building a business that depends heavily on you as the founder, it becomes a harder sell when it’s time to exit. Focus on putting processes and systems in place that ensure the business can run efficiently without you, making it more attractive to potential acquirers.
Profitability vs. Growth Balance
While growth is essential, profitability matters too, especially when looking ahead to a sale. Buyers will assess the health of your business through its margins. To achieve a successful exit, you’ll need to find the right balance between aggressive growth and profitability. Create a financial plan that incrementally improves profitability while maintaining a strong growth trajectory.
Putting the Right Systems in Place
Once you’ve identified where your business needs to be to achieve your ultimate goal, the next step is putting the right systems in place to get there.
Financial Reporting and Metrics
Tracking the right financial and operational metrics is key. Buyers will scrutinize your financials during due diligence, so establishing strong accounting practices early on is essential. Make sure you have clear visibility into metrics like gross margins, customer acquisition costs, lifetime value, and churn rate.
Team and Leadership Development
Your team is a critical asset, and buyers will evaluate the leadership and workforce just as much as the product or service you offer. Invest in talent, build a strong culture, and ensure that leadership roles are filled by capable individuals who can continue the company’s growth without you.
Legal and Compliance Structure
Ensure your business structure and legal documentation are in order from the start. Poorly constructed contracts, lack of intellectual property protection, or regulatory non-compliance can derail a potential sale at the last moment. Address these issues early and consistently.
Why It's Never Too Early to Think About M&A
By keeping the end in mind from the beginning, founders and CEOs can make more strategic decisions that set their business up for success. Far too many companies find themselves scrambling to "dress up" their business for sale when the time comes, realising that they haven’t laid the groundwork for a successful exit.
A well-thought-out exit strategy ensures you won’t be caught off-guard. More importantly, it helps you build a business that’s not only attractive to buyers but also better positioned to grow sustainably.
In summary, it’s never too early to think about M&A or your business’s ultimate goal. The sooner you begin planning with the end in mind, the easier it becomes to work backwards and build the company that will get you there. So, ask yourself: What does my business look like at the end? Then, take the steps today to get there.
Comments