Don’t Stay Past Midnight – Reflections on Knowing When to Sell Your Business (Part 6)

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If you’ve been with us for the preceding weeks, you know that we’ve been walking through a list of six ways to objectively determine if it might be a good time to consider the sale of your private business.  Last week’s blog addressed the concept of making sure there is enough future value remaining in the business to attract investors.  In short, if you wouldn’t invest in your company today, then why would someone else?

This week, we’re going to explore the 6th and final point below which suggests that if your competitors are deciding to sell, then they have likely thoughtfully considered one or more of the items on our list and concluded that the timing was right.

  1. Valuations are Historically High
  2. You’ve Experienced Multi-Year Growth in Revenue and Profits
  3. Expected Proceeds from an Exit Exceed Your Previously Defined Goals (i.e. You’ll Hit Your “Number”)
  4. The Industry is Experiencing Tailwinds from Positive Trends
  5. Value Remains for the Next Buyer
  6. You See Your Competitors Deciding to Sell

Remember when your mom said, “If your friends jumped off of a cliff, then would you do it too?”  Well, maybe you would if the cliff was a metaphor for selling your business and valuations in your industry were historically high, you’d experienced consistent growth in Revenue and Profits, a sale would allow you to live in a manner consistent with your goals, your industry was benefitting from an upswing, and the business would make for a good investment by an investor’s standards.  Here are some more reflections on the topic:

  • You See Your Competitors Deciding to Sell. If you assume that (i) an entrepreneur’s business is their most valuable financial asset and (ii) that they are not likely to part ways with it unless one or more compelling factors drove them to the conclusion to sell, then news of a competitor deciding to exit should result in some real introspection on your own exit timing.  And, an ancillary benefit of a competitor proceeding with a transaction is that you can often triangulate around the purchase multiple once the gossip mill starts humming about the deal.  It goes without saying that just because your peers in the industry decide to sell, it doesn’t mean that you have to.  Perhaps you have a higher risk tolerance than they do and your patience will pay off.  Just recognize that forces could be at work that are creating a good window for an exit.

Well, this completes our blog series, and we hope you’ve benefitted from some of these perspectives.  As always, we’re interested in your feedback.  To start a conversation, please reach out to Joe Schmidt (jjs@clearlightpartners.com) or Mark Gartner (mpg@clearlightpartners.com).  We want to hear from you!

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About ClearLight Partners

ClearLight is a private equity firm headquartered in Southern California that invests in established, profitable middle-market companies in a range of industry sectors. Investment candidates are typically generating between $4-15 million of EBITDA (or, Operating Profit) and are operating in industries with strong growth prospects.  Since inception, ClearLight has raised $900 million in capital across three funds from a single limited partner. The ClearLight team has extensive operating and financial experience and a history of successfully partnering with owners and management teams to drive growth and create value.  For more information, visit www.clearlightpartners.com.

Disclaimer: The views and opinions expressed in this blog are solely my own and do not necessarily reflect any ClearLight opinion, position, or policy.

Don’t Stay Past Midnight – Reflections on Knowing When to Sell Your Business (Part 5)

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If you’ve been with us for one of the preceding weeks, you know that we’ve been walking through a list of six ways to objectively determine if it might be a good time to consider the sale of your private business.  Our prior blog highlighted why investors respond well to an industry that is benefitting from positive trends that are likely to continue for the foreseeable future.  In short, good industries often support good investments, and if your business is operating in a sector with tailwinds at its back, this could be another factor contributing to a decision to explore an exit. 

This week, we’re going to explore #5 below which is a good reminder that in order to drive a good exit, buyers have to believe that your business has strong growth prospects for the foreseeable future.  This is important because whoever buys your business has to also believe that they will be able to sell the growth story to another investor down the road. 

  1. Valuations are Historically High
  2. You’ve Experienced Multi-Year Growth in Revenue and Profits
  3. Expected Proceeds from an Exit Exceed Your Previously Defined Goals (i.e. You’ll Hit Your “Number”)
  4. The Industry is Experiencing Tailwinds from Positive Trends
  5. Value Remains for the Next Buyer
  6. You See Your Competitors Deciding to Sell

Think of it this way, nobody would purchase a lemon with all of the juice squeezed out of it, right?  Perhaps a lemon is not the best example here, but you get the point.  Here are some more reflections on the topic:

  • Value Remains for the Next Buyer. Sometimes, an owner’s decision to exit is driven by the threat of looming headwinds to the business or industry.  Conceptually, getting out before these challenges arrive makes sense, but it’s likely that investors are already, or will be, attuned to those same issues, and it may then be too late to drive an optimal outcome from a sale.  At a minimum, investors are going to need to know that the prospects for growth will remain strong for the next 5-10 years.  Otherwise, they may encounter challenges when they ultimately seek an exit.  Said another way, if you are considering an exit, reflect on whether you would want to invest in your business today. 

  • To drive home the point visually, take a look at the following chart that illustrates how an investor may assess the relative attractiveness of your business based on the expected growth in profitability over time.  The punchline is that your prospects for an exit are substantially improved if investors see a sustainably bright future for the company.

Stay tuned for our final blog where we’re going to address point #6 above, You See Your Competitors Deciding to Sell.  As always, we’re interested in your feedback.  To start a conversation, please reach out to Joe Schmidt (jjs@clearlightpartners.com) or Mark Gartner (mpg@clearlightpartners.com).

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About ClearLight Partners

ClearLight is a private equity firm headquartered in Southern California that invests in established, profitable middle-market companies in a range of industry sectors. Investment candidates are typically generating between $4-15 million of EBITDA (or, Operating Profit) and are operating in industries with strong growth prospects.  Since inception, ClearLight has raised $900 million in capital across three funds from a single limited partner. The ClearLight team has extensive operating and financial experience and a history of successfully partnering with owners and management teams to drive growth and create value.  For more information, visit www.clearlightpartners.com.

Disclaimer: The views and opinions expressed in this blog are solely my own and do not necessarily reflect any ClearLight opinion, position, or policy.

The Art of the Humblebrag

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Read time: 2-3 minutes

“A fool tells you what he will do; a boaster what he has done.  The wiseman does it and says nothing.” (unknown)

Remember when bragging used to be considered a bad thing? It actually wasn’t that long ago, but it seems like a distant memory.  Imagine what our favorite social networking sites would be like if you stripped away the shameless self-promotion – you’d start seeing the digital equivalent of tumbleweeds ambling across an otherwise quiet Feed.

Humblebragging is defined as, “Making a seemingly modest, self-critical, or casual statement or reference that is meant to draw attention to one’s admirable or impressive qualities or achievements”1.  Sound familiar?  For a few common examples, take a look at the following garden variety humblebrags:

  1. So humbled…So…honored…So grateful2. This is the most common tactic for sharing something that a person is proud of.  Note that the humility infused setup will always be immediately followed by news of the subject’s participation on a panel, receipt of recognition, giving of a speech, or contact with a celebrity relevant to their line of work. If you have been sucked into the Feed and encounter the words “humbled”, “honored”, “grateful”, or others of their ilk, then keep scrolling
  2. My life has been hard, but I’m crushing it. These posts are seemingly micro-sized motivational speeches but are actually boasts in sheep’s clothing.  They are a fabulous way to talk about the adversity a person has historically encountered but how they presently have the American Dream in a headlock.  Look for shots of a person on a boat, reclining on a private jet or otherwise flaunting the trappings of success.  As a general rule, treat these posts like you would fluorescent coloring on a frog in the Amazon, and give their owners a wide berth.
  3. [Insert Name] did a great job…and so did I. This is the more Machiavellian derivative of example #1 that uses the misdirection of applauding someone else while making sure to peek your head into the frame.  Example: humblebragger participates in a noteworthy event hosted or moderated by someone else.  Humblebragger then compliments said host on their performance while displaying a picture that includes both the humblebragger and the target of their self-interested praise.  While a clever adaptation of the humblebragging genre, it’s ultimately as transparent.

The problem with all of this false modesty is that it’s been proven to make people dislike you.  A 2018 study from researchers at Harvard and the University of North Carolina Chapel Hill suggests that humblebragging actually makes people like you less than if you were to employ good old-fashioned self-promotion.  One of the study’s authors, Ovul Sezer, suggests, “You think, as the humblebragger, that it’s the best of both worlds, but what we show is that sincerity is actually the key ingredient.”

To be clear, I’m not calling for an elimination of all promotion – that would essentially destroy the marketing industry, and well-executed advertising can be important to getting what you want, personally and professionally.  Rather, I propose that we evolve to what I’ll call “Self-Promotion 2.0”.  In other words, eliminate the sleight of hand and embrace sincerity.  Here are some ideas:

  1. Mention what you did, hold the humility. If you feel compelled to share an accomplishment with the cybercommunity, then simply share it without the sneakily self-effacing lead in.  Per the study referenced above, people may still find the self-promotion annoying, but it will be relatively less annoying than the equivalent paired with a side of humblebragging.
  2. Offer something of value. One of my favorite features of LinkedIn, before it got all humblebraggy, was the articles that people would share.  The Feed was essentially a curated collection of the best business thought pieces across an array of topics, and I loved the daily exercise of leveling up my thinking in relevant areas.  The beauty of article (or video) sharing is that if you consistently distribute high value information relevant to your industry, you become associated with thought leadership in your field.  Let’s bring that back to the forefront.  On the flipside, one positive trend I’ve noticed is a lot of people are starting to publish more original content on the platform which is a great way to stay current on my friends’ and colleagues’ long-form perspectives on issues resonating with them.  Keep up the good work!
  3. Advertise future events. While a fairly utilitarian application of social networks, this is a practical way to get the word out about upcoming events that those in your network may want to attend.  What’s refreshing about these posts is that the objective is in plain sight and not obfuscated by feigned meekness.
  4. Promote someone else without agenda. If you observe someone do a kudos-worthy job of something, a wonderful way to acknowledge them is through social media.  Just make sure you aren’t trying to grab some of the reflected glow for your own benefit.  This one doesn’t even fall into the self-promotion category, this is just encouragement for the sake of making someone else feel good.

Man, it feels good to get that one off my chest.  Interested in any reactions or comments, fire away with feedback.

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1Merriam-Webster

2I’m embarrassed to admit that a younger me has deployed versions of the “So humbled…” post in an early attempt to get involved in the self-promotion game.  I feel about that like I do about parting my hair down the middle in the 7th grade – it seemed like a good idea at the time, but I now regret it.  And, no, this footnote is not some meta attempt to reference the existence of my own humblebrag-worthy accomplishments by citing the fact that I’ve humblebragged in the past.

About ClearLight Partners

ClearLight is a private equity firm headquartered in Southern California that invests in established, profitable middle-market companies in a range of industry sectors. Investment candidates are typically generating between $4-15 million of EBITDA (or, Operating Profit) and are operating in industries with strong growth prospects.  Since inception, ClearLight has raised $900 million in capital across three funds from a single limited partner. The ClearLight team has extensive operating and financial experience and a history of successfully partnering with owners and management teams to drive growth and create value.  For more information, visit www.clearlightpartners.com.

Disclaimer: The views and opinions expressed in this blog are solely my own and do not necessarily reflect any ClearLight opinion, position, or policy.