Learn the 4 pillars that make your online service-based business attractive to buyers, ensuring a profitable exit for 8 figures or more.
There are an estimated 62.5 million millionaires worldwide. 79% of US millionaires didn’t receive any inheritance from family members. Only 2% of millionaires come from upper-income families. The centi-millionaires got rich from building, buying, and selling assets.
This is why it’s a good idea to build your online business in a way that it can be acquired later down the line. An online business is a way to build free cash flow, but many forget that owning the assets is where wealth is created.
For real wealth, you build a business with enterprise value where you can step away from the day-to-day operations. This way, you can exit for £10m+, and then have options to go into Private Equity to grow your wealth even more.
The Growth Partner Model scaled us from £0 to £197,000 a month. We specifically designed it with advice from three London M&A (mergers & acquisitions) consulting firms throughout the process. In this blog, we will cover the four main pillars M&A professionals look for in an online business, so you can leverage these pillars to build enterprise value in your own online business:
This is critical to ensure company growth during and after the exit process, but also to put confidence in both sides of the deal. Stakeholders want no bumps in the operations during the transition, and internal talent wants to be confident in their job security. A strong leadership team will ensure everything goes smoothly during and after the transition in ownership.
There’s a key word that pops up a lot in M&A: stability. There’s nothing that makes a valuation more attractive than predictable recurring revenue. This is why the longer the contracts, the better.
Would you buy a business for £10m+ if it relied upon contracts that were only 3 months long?
Unless you were a thrill seeker, you wouldn’t. And nobody interested in investing £10m+ into a business is a thrill seeker type. They want stability and reliability. The transition of ownership alone can take over 12 months, which is why contracts for a minimum of 12 months are crucial.
M&A professionals adore blue-chip clients. So much so that the valuation multiplier is higher with them because of their reputation, pricing power, and growth potential. Multipliers aside, these clients pay higher anyway, which increases revenue, which increases enterprise value. They also tend to go for 12-month+ contracts and stay with you for a longer time.
Last of all, these clients are attractive because of their marketing potential. Referrals to other reputable companies are likely, and working with them is like a credential proving your trustworthiness. The ultimate social proof.
You’re not taken seriously in the M&A market until £500,000 a month. EBITDA in the 25-35% range shows potential buyers you have excellent profitability, strong fundamentals, and a proven business model.
To summarise, buyers are looking for:
Every factor communicates three crucial things: Profitability, Reliability, and Sustainability. Master these three elements of business from the start, so if you scale to the point where you want to exit the business, you’ll already have the structures in place to do so.
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