Tag: Sean Magennis

There is a good time to sell. And there is a bad time to sell. Unfortunately, this is largely out of your control. Focus on building a highly desirable boutique and be patient. Wait for the sun to be shining.

Boutiques run on cash. They do not run on net income nor EBITDA. Some boutiques neglect the management of cash flow. Take a moment to understand how you can improve the flow in and out.

What have you done for me lately? Buyers of your boutique are purchasing who you are becoming. They are not buying who you have been. Yesterday is worthless to them. They are looking forward. And need to be excited about your potential to improve.

Boutique firms often grow but do not scale. Growth means more projects delivered with the same type of staff. If nothing changes, then the growth rate is proportional to the number of partner/owners required. This means the profit pool increases but it must be shared with more partner/owners. More growth means the need for more partner/owners. This results in a bigger boutique but no increase in income or wealth for the founders. Improved leverage means improved incomes and wealth for the founders.

The “wow” factor matters. Like it, or not, you are in show business. You are an expert. And your firm is made up of experts. No one wants to buy the boutique that regurgitates other people’s innovations. They want to buy the song writers, aka The Rolling Stones.

Scaling a boutique takes money. This type of money is called scale capital. There are three primary sources of scale capital. Each has a set of advantages and disadvantages. Which is best for you is highly situational. And all work well when applied correctly. If raising scale capital makes you uncomfortable, do not attempt to scale. Many people are happy with lifestyle businesses.

The perceived difficulty, or ease, of integrating your boutique will affect your sale. Understand the org model of the type of firms who might buy you. Redesign your model to be seamlessly integrated if bought. This will increase the chances of exiting.

Most acquisitions fail. The primary reason for failure is poor culture fit. Do not hide your culture. Lead with it. You want your sale to be successful. Therefore, you need to find a buyer who fits your culture.

The quality of the management team is of major importance to a buyer. It can take years to develop a bankable team.

Potential acquirers need a factual gauge of employee loyalty before they write the check.