How to Maximize Your Exit: Unveiling the Secrets of Selling to Strategic Buyers

In most entrepreneurs’ minds, their ventures will be profitable when they exit. In reality, the picture is bleaker.

According to the U.S. Bureau of Labor Statistics (BLS), 20% of new businesses fail in their first two years, 45% in their first five years, and 65% in their first ten years. What’s more, just 25% of new businesses survive 15 years or longer.

Despite this, there is some good news. A hidden gem exists among IPOs and private equity firms: strategic buyers. You can expect these companies to acquire your business for a synergistic fit, resulting in a win-win situation. Among those who have proven this is Rob Follows.

Rob Follows

As a young man in his twenties, he sold his marketing and strategy business for 27 times EBITDA — a dream come true for any entrepreneur. Upon learning the buyer would have paid a staggering 300% more, the thrill turned to frustration. After realizing this, he had a powerful idea: what if he could help other entrepreneurs avoid the same pitfalls?

Rob founded STS Capital Partners with the mission of guiding entrepreneurial business owners toward “extraordinary exits,” a unique Mergers and Acquisitions (M&A) firm. As an entrepreneur himself, Rob is committed to ensuring this owner gets the best value for their business when he decides to sell it.

Suffice it to say, what he’s done is impressive. Over the course of his career, Rob has been involved in over a thousand M&A transactions valued at over $100 billion. Besides engaging with clients, he speaks on industry circuits, and he even wrote a book called “Everyone Has Their Own Everest, What is Yours?”

Despite his financial success, Rob has a passion for more than just money. Besides being the founding Chairperson of Altruvest Charitable Services, he is also the President of the Canadian charity that assists other charitable organizations in maximizing their impact. In Rob’s opinion, by helping entrepreneurs achieve their financial Everest, they will be able to engage in charitable causes that matter to them.

If you’re an entrepreneur on the crest of your business journey, Rob Follows and STS Capital Partners might be the perfect guides to help you achieve success and make a positive impact.

From Adversity to Opportunity: Building Resilience

It is remarkable how resilient Rob has been throughout his life. His upbringing was challenging, and he had to face hardship head-on. Throughout this experience, his character was shaped and his drive for success was instilled. As a result, it is Rob’s philosophy to turn challenges into opportunities for growth, demonstrating the strength that arises when we overcome adversity.

His entrepreneurial spirit blossomed as a child, when he sold lollipops and launched his first venture at the age of 12. As a result of these early experiences, a career marked by innovation and strategic thinking was paved, setting me on my way to future success.

In life, however, things rarely unfold as they should. Because of this, it’s important to take advantage of unexpected opportunities. As an example, Rob experienced a transformative experience at Oxford University that broadened his horizons and exposed him to the world of academia. The opportunity offered him a chance for self-discovery and intellectual growth, despite his initial reservations.

The Open List of Dreams: Dare to Dream Big

In order to achieve your dreams, Rob encourages you to keep an “open list of dreams” and actively pursue their accomplishments. It is only by dreaming big that anything worthwhile can be achieved. By visualizing your goals, you get inspired to take action towards achieving them.

Dreaming big is not as easy as it sounds, but here are some tips on how to do it:

• Make a list of your passions. Is there anything that truly excites you? Are there any problems in the world that you would like to solve? Getting in touch with your passions will make your dreams more meaningful and attainable.
• Don’t be afraid to set audacious goals. If you don’t get scared by your dreams, then they’re probably not big enough!
• Break down your big dreams into smaller, actionable steps. As a result, they will seem less overwhelming and you will be able to stay on top of them.
• Find a mentor or role model who has achieved similar goals. They’ve got a lot of experience you can learn from.
• Believe in yourself and your ability to succeed. The key to overcoming challenges is having a positive attitude.

As Rob says, “Whatever you can conceive and believe, you can achieve.”

The Strategic Buyer Advantage

It is important to keep in mind that strategic buyers look beyond your financial metrics. Within their own organization, they recognize the potential for seamless integration and growth. Comparatively, this results in significantly higher valuations.

Rob’s career demonstrates the power of adaptability and navigating uncertainty. His journey is a testament to perseverance and strategic foresight, from founding and selling multiple businesses to forging connections with industry leaders.

As part of Rob’s approach, he emphasizes the importance of strategic partnerships and mentorship. As an example, throughout pivotal moments, his relationship with Bill Maritz, the founder of Maritz Inc., served as a guiding force.

Rob offers aspiring entrepreneurs a powerful message: “You too can sell to strategics.” 

In addition to seeking trusted advisors, he emphasizes the importance of cultivating relationships with potential buyers. As long as entrepreneurs create value and understand acquirers’ needs, their chances of success increase significantly.

Unearthing Hidden Gems

If you were to buy a home and discover a cache of Rembrandts hidden in the attic, how would you feel? In the same way, your business may possess hidden assets – unique skills, processes, or knowledge – that enhance its value to a strategic buyer.

The key to recognizing these “Rembrandts in the attic” comes from Rob’s own experience when he sold his business to Maritz and discovered untapped value that he hadn’t realized. The fact that Maritz was willing to pay 27 times EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) was a revelation, demonstrating the potential strategic buyers held.

Strategic vs. Financial Buyers: Understanding the Difference

Unlike financial buyers, strategic buyers aren’t solely concerned with financial metrics. Their long-term objectives are aligned with access to new markets, complementary technologies, or synergies that enhance their existing operations. When you strategically position your business, you unlock a world of value that goes beyond traditional metrics.

As Rob emphasizes, strategic buyers should engage advisors who understand their mindset. Entrepreneurs can also identify potential acquirers, tailor their business offerings, and navigate the complexities of strategic selling by working with these advisors.

Finding the Right Advisors: Navigating the Strategic Sale

In Rob’s view, engaging advisors who understand the strategic buyer’s mindset is vital. In addition to navigating the complexity of strategic selling, these advisors can assist with identifying potential buyers and tailoring your offerings to meet their needs.

The ValueMax Approach: Proactive Planning for Maximum Value

As a proactive strategy to maximize business value before a sale, Rob introduces the ValueMax approach. For this to happen, meticulous planning must begin well in advance, so that your business aligns with strategic buyers’ needs and preferences. 

Entrepreneurs can position their companies in a way that attracts premium offers by understanding what strategic buyers value most.

Beyond Business: Building a Legacy Through Wealth

The goal of many successful individuals is to leave a lasting impression beyond their professional accomplishments. In Rob’s case, the power of wealth to create positive change is evident in his passion for philanthropy. 

In other words, building wealth involves more than just accumulating money. Additionally, you should consider:

• Knowledge and values. Future generations will be able to manage their own wealth effectively if financial literacy is passed on. Describe the principles that guided your financial decisions and the wisdom you gained from them.
• Charitable giving. Your wealth can be used to support causes that align with your values by leaving a portion to them.

According to Rob, it’s all about strategic life planning and the role we play in our own destiny.

Envisioning Your Future: Fearlessly Pursuing Your Dreams

Rob stresses the importance of envisioning your future and taking proactive steps toward making it a reality. By focusing on the power of visualization and goal-setting, he supports the adage, “Whatever you believe in, you can achieve.” 

While acknowledging fear as a barrier, he encourages people to overcome it in order to unlock their full potential.

Philanthropy as a Cornerstone: Using Wealth for Positive Change

Rob’s commitment to philanthropy is one of the defining aspects of his life planning. He realizes how essential it is to leverage wealth and resources to support charitable causes.

Conclusion

An exit strategy involving a strategic buyer can be highly rewarding. It is however smart to seek the right guidance, understand the buyer’s perspective, and position your business for strategic value if you want to maximize your return.