Recent studies have shown a few trends that should perhaps worry CEOs. Firstly, two-thirds of the fastest-growing companies fail. You might think that reaching hypergrowth status puts you on the inevitable path to success. If only it were that easy.
Other research suggests steady-growth businesses tend to do better in the long-run than their faster-growing counterparts.
To grow fast, milk the market, and sell at the top requires smart thinking, tunnel vision, and determination.
The pace of change naturally leads to kneejerk decisions, bad hires, and declining customer service – which long-term strategic planning can help to mitigate.
Above all, you need to remain sustainable and not dependent on the next funding round for cashflow.
And you need to be ready to hand over the business to a new owner if things get too much or you start feeling out of your depth.
What counts as a scale-up?
An entrepreneurial venture with proven product-market fit, but now requires investment in new people, offices and marketing to achieve 20% yoy growth.
This requires rapid organisational change and skillset management as the business moves from say 50 employees to 400 in a short space of time.
Why sell a scale-up business?
What circumstances would lead you to step back from your business? You may anticipate reaching the extent of your capabilities or ambitions (entrepreneurial skills are not the same as those needed in ongoing management and leadership roles: starters are rarely finishers).
You may know you are going to need an injection of funds for another growth phase.
Or perhaps you think the next few years will exhaust your interest, so you are likely to want to move on to another challenge.
Whatever your outline ideas, thinking ahead like this can help determine your strategy for future and how you run your organisation in the intervening years. It can help you develop and shape the business so that if you do decide to sell, whatever the timeframe, you will be in a good place to attract a buyer sufficiently keen, capable and funded to take it to the next level.
Getting your business exit-ready
‘Growing to sell’ over the long term imposes no constraints – you can always change your mind or the plan. Nor is there a downside if you start several years out. You’ll either structure and run the business in a way that maximises its planned sale value, or operate at peak efficiency as you continue to grow it.
Either way, your state of readiness enables you to be opportunistic, selling if and when the market, business and your state of mind align.
[Further reading: When Should I Sell My Business?]
Barriers to building a sale-ready business
Why then doesn’t every business exist in this ideal state?
Simply, real life gets in the way. Just keeping the business chugging along takes up a huge amount of time and energy.
Most entrepreneurs are not trained as leaders or managers. Equally, mature businesses face the twin issues of ruts and entropy.
Ruts happen naturally, as the wheels of daily business create easy-to-follow natural grooves. People become comfortable through repetition – and risk averse. Entropy then erodes the energy and purity of vision which characterised the founding of the business.
These are natural forces. As long as the business remains profitable, there is little incentive to shake things up. Change is hard, uncomfortable and (unless an existential crisis arises) easily postponed. Meanwhile, skills erode, investment reduces and knowledge goes unrenewed.
This state of comfort and inertia explains why most mature businesses flatline –becoming nowhere near as fit for sale as they should be.
The power of potential – how to assess acquirer opportunities
So how do we convert stasis into sellable propositions?
Here we outline the ABC aspects of strategic, tactical and day-to-day business that a five-year plan might address, making any organisation more appealing to a purchaser.
Identify your USP for acquirers and investors
- Start with a mission and vision, setting out your purpose (why you exist, not what you do). These are not words on a page: they are daily reference points
- Map and communicate your long-term direction and destination, based on this mission and vision, sharing it with all of your stakeholders
- Define your scarcity value you have – or wish to have. Build your future around maximising this value.
Plan ahead for when sales plateau
- Determine your readiness for growth. This goes far beyond your aspirations to extract further value from what you have in place already.
- Are your growth plans limited or limitless?
- If you grow through massive customer acquisition, will this add value – or should you specialise around more targeted HNW opportunities?
- Have you researched the future market?
- Do you have the IT, marketing and sales plans/teams in place to handle growth?
Optimise your customer base for long-term growth
As your business grows, you'll inevitably win and retain customers who keep the cash flow steady. These clients pay the bills, so it's easy to assume they're all essential. But have you ever paused to ask if they are the right customers?
Taking time to evaluate your customer profile is a smart move at any stage. Start by identifying which 25% of your customers contribute the most to your profits, growth, synergies, and productivity. This top-performing group is your business’s core.
Next, shift focus to the remaining 75%, particularly the bottom quartile. These are the customers who may generate less value and require higher maintenance. It’s important to assess whether they are worth retaining or if it’s time to start phasing them out.
The beauty of a five-year plan is that it allows you to manage this shift organically and profitably. By gradually replacing low-value clients with those that align better with your top-tier customer profile, you can ensure sustainable, long-term growth without causing disruption to your business.
Reduce inventory in run-up to a business sale
If your business holds substantial stock, it's crucial to consider a potential buyer's priorities and preferences as you prepare for a sale. A key aspect buyers will evaluate is your stock turn strategy—how quickly and efficiently you’re moving inventory.
Take a close look at whether your processes and IT systems are up to date, resilient, and effective. Buyers want to see streamlined, modern operations that minimize risks and maximize efficiency.
As you approach a sale, you may want to free up warehouse space and reduce overhead costs by converting assets into cash. This not only makes your business more attractive to buyers by improving liquidity, but it also simplifies operations, leaving a leaner, more efficient company for the purchaser. Properly managing your stock in the lead-up to a sale can significantly improve your business's appeal and final valuation.
Implement operational efficiency
- Review all contracts to ensure they are updated, accessible, fit for purpose, and easily transferable.
- Assess how well-protected your business is. Would you buy it as it is now, or do you need to enhance insurance, warranties, or crisis readiness?
- Evaluate your financial status and team. Are your management accounts and reporting accurate, up-to-date, and presented professionally?
- Ensure reporting is generated by smart systems, backed by transferable processes, and supported by clear documentation and handbooks.
- Consider your office space and WFH strategy. Is your infrastructure robust enough to support your team and business growth?
- Review your team. Are they the right people within the right culture, and can they adapt to a new buyer or a change in direction?
- Assess whether your key staff could transition smoothly to a new buyer or if they are resistant to change and stuck in routines.
- Ensure you have trusted suppliers and professional advisors in place for stability during a sale.
- Objectively evaluate your operations. Is the business led by true leaders or just managed day-to-day?
- If the business is heavily dependent on you, consider devolving responsibilities to ease the transition during a sale and improve current operations.
Further reading: 10 ways to reduce business owner dependency
Making this work is far harder than compiling a list. It means disruption, but also improvement. The road leads to a far better destination and (almost certainly) a more rewarding business exit when the time comes.
So make time – and refresh your plans. And make contact with an advisor who can guide and accompany you – every step of the way.
