Watching your business grow is a beautiful thing. In the early stages, growth often occurs organically and at a manageable pace. Then the day arrives when you see new possibilities. After years of slow, steady growth, you believe there are real opportunities in the market to scale the business.
Another consideration is financing. Do you have the capital available to take your business to new heights?
If you’ve taken the company as far as you can on your own and need industry know-how, business expertise and capital, a smart option may be to partner with a private equity firm. Along with serving as a primary source of financing for your business, a private equity group may also provide:
1. Borrowing Power. A well-heeled investor often has the capacity to borrow more money than you could on your own. Plus, skilled investors know how to best structure financials. This can help you secure the capital you need (when you need it) and position your company to take advantage of long-term financial opportunities.
2. Operational Know-How. When you scale a business, the operation can grow in leaps and bounds and old processes and procedures may not work best. Finding an investor who understands your business and industry, and who knows how to enhance business operations, can prepare your business to meet expanded demand. Many investors have owned or invested in companies similar to yours, so they know what to expect during the growth process.
3. Efficiency Expertise.The right capital partner can also help improve efficiency and reduce expenses in your business. You can benefit from the investor’s vast experience developing other businesses and the proven, sophisticated processes they have developed over time. Improved efficiencies from equipment, technology, labor, vendors, logistics and more can contribute significantly to your bottom line.
4. Industry Insight. An investor who has spent years working and connecting in your industry can be an invaluable resource. They know how the industry works, stay on top of current trends and may have relationships and partnerships in the space. This could include trusted suppliers they can leverage to reduce costs or potential employees who give your company the edge required to scale.
5. Strategic Expertise. A capital partner who has grown companies and has industry connections may also help facilitate a synergistic or strategic industry partnership. Bringing the right players together could allow your business to scale more quickly and grow larger than would be possible on your own.
6. New Channels. Investors who specialize in growing middle-market businesses are skilled at developing new distribution channels for products or services when appropriate. When you create new, viable channels, new customers will follow and your business grows faster.
Don’t Let Fear Prevent You from Considering Private Equity
Many entrepreneurs resist bringing in a capital partner, because they don’t want to give up a percentage of ownership in their company. They fear that there will be a smaller piece of pie left for them once the deal is done. While the percentage owned may be smaller, with the right investor, this smaller piece of pie will end up coming from a pie that is much larger than the business owner ever dreamed.
Case in point: Watch the video story of our client CEO Kevin Tupy of Z Wireless.
CEOs who need professional insight on scaling their businesses should turn to a reputable M&A firm for guidance. The investment bankers at Allegiance Capital Corporation are here to help. To speak with a member of our team, please call us at (214) 247-6846.
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Keywords: middle-market businesses; M&A firm; enterpreneurs; CEOs; investment bankers; private equity