How do you know it's the 'right time'?

We are kicking off the new year with some more student questions on launching and growing a business.

QUESTION:

Hello Mr Fitzpatrick,

Thank you for speaking and giving much insight into the business world to me and my fellow classmates.

In response to your lecture, I did have one question.

You mentioned having owned many businesses, selling them and starting new ones. How did you know when the time was right to sell or when your new business venture was needed?

Thank you again,

Jay*

FITZ ANSWERS:

Hi Jay,

Thanks for reaching out.

Good Question; but it is not a short answer as there are a number of factors that I have learned over the years and below is a good list of what I do to build toward and evaluate my business for exit.

Building for Exit Potential:

When analyzing exit options for a business, it's crucial to focus on creating an attractive, valuable enterprise that offers multiple potential exit paths. The key is to build a company with strong fundamentals, market positioning, and growth potential, rather than trying to predict the precise timing of an exit. Here's a framework for approaching exit strategy analysis:

1. Build a Valuable Business

Focus on creating a company with:

- Strong financial performance

- Scalable business model

- Unique market positioning or competitive advantage

- Diverse customer base

- Robust intellectual property

- Talented management team

2. Cultivate Multiple Exit Paths - I have done all of these but IPO

Develop relationships and position the company for various exit options:

- Strategic acquisitions by larger industry players

- Private equity or venture capital investments

- Initial Public Offering (IPO)

- Management buyout

- Merger with a complementary business

3. Expand Market Reach

Consider diversifying into related industries or markets to:

- Broaden appeal to potential acquirers or investors

- Mitigate risks associated with a single market focus

- Demonstrate scalability and growth potential

4. Foster Industry Relationships

Build connections with:

- Potential strategic acquirers

- Investment banks and financial advisors - Good Investment Bankers have their ears to the ground - talk to them often!

- Venture capital and private equity firms

- Industry analysts and thought leaders

5. Enhance Value Proposition

Continuously improve the company's value by:

- Innovating products or services

- Expanding market share

- Improving operational efficiency

- Strengthening the management team

6. Monitor Market Conditions

Stay informed about:

- Industry trends and consolidation patterns

- Macroeconomic factors

- Regulatory environment

- Competitor activities and valuations

7. Assess Readiness Factors

When considering an exit, evaluate:

- Economic conditions: Overall market health, interest rates, investor sentiment

- Industry conditions: Sector growth, technological disruptions, regulatory changes

- Geopolitical considerations: Political stability, trade policies, global economic trends

- Company's growth potential: Future market opportunities, expansion plans

- Barriers to future growth: Competition, market saturation, resource constraints

8. Maintain Operational Focus

While preparing for potential exits:

- Continue executing the core business strategy

- Prioritize sustainable growth and profitability

- Maintain transparency and strong corporate governance

9. Seek Professional Advice

Consult with:

- Investment bankers

- Legal advisors

- Tax specialists

- Industry experts

10. Remain Flexible

Be prepared to:

- Adjust strategies based on changing market conditions

- Pursue unexpected opportunities that arise

- Balance short-term exit opportunities with long-term value creation

I focus on all of these factors - which really boils down to the focus and execution of building a quality business so that you can position your company for multiple attractive exit options without becoming overly fixated on timing. The goal is to create a valuable enterprise that offers flexibility and choice when the right exit opportunity presents itself.

Once I sell a business I usually draw on many ideas I have had over the years of underserved markets or an unsolved problem. This is what drives me! Finding those untapped market opportunities - I stay awake many an evening thinking about the endless potential and possibilities that exist out there to start and solve a problem.

I hope this helps! You can probably write an entire Doctoral Thesis on this topic alone!

Best of luck to you!

Brian

*Name has been changed to maintain student privacy