Navigating the Interest from Private Equity: A Personal Perspective
Over the past few months, I’ve been inundated with messages from private equity firms eager to discuss the possibility of acquiring my business. “Gene,” they state with interest, “we’ve been following your growth in the technology sector and believe we can help you unlock value while preserving your legacy and team. Would you be open to a 20-minute call to discuss mutual opportunities?”
At first glance, this flattery is hard to ignore. According to recent data from Harvard’s Corporate Governance site, private equity exits surged from $754 billion in 2023 to an impressive $902 billion in 2024—a remarkable 20% increase. Additional reports indicate that the value of these deals shot up by 50% in the first half of 2024 alone, further spotlighting the strategic acquisitions reshaping the industry.
The Surge of Private Equity
Private equity firms are increasingly making their presence felt across various sectors—scooping up contractors, manufacturers, distributors, and technology companies alike. Why this sudden influx? Many small business owners are nearing retirement, with the average owner in the U.S. now over 55 years old, as reported by the Small Business Administration. This demographic shift creates a wave of potential exits, much to the delight of investors in search of businesses characterized by strong financials and growth potential.
The Reality Check: Is My Business Sellable?
Despite the charm of these offers, I find myself wrestling with a reality that many might find unsettling: my business might not be sellable at all. While I would consider entertaining offers, the moment a buyer takes a closer look, they may uncover an uncomfortable truth: my company lacks real tangible value.
The Balance Sheet No One Wants
Firstly, let’s discuss the basics. My business doesn’t boast hard assets—no buildings, no hefty equipment, and no physical property to speak of. We only have a modest amount of cash and accounts receivable to count as assets. The upside? We also carry very few liabilities; in fact, the majority of our payables are prepaid client deposits. While this cash flow model alleviates risks, it simultaneously poses a liability a potential buyer would have to honor, which isn’t exactly a selling point.
No Contracts, No Guarantees
Our agile business model operates without locking clients into long-term contracts. We’ve never offered maintenance agreements or recurring support plans, which means our clients approach us as needed and depart just as freely. This lack of long-term commitment creates a revenue stream that is anything but predictable. If a private equity firm were to conduct a thorough evaluation, they’d quickly see that there’s no reliable income to secure a buyer’s investment; instead, we flow from project to project without a clear trajectory.
A Team that Disappears with Me
While I do have employees, a significant portion of work is handled by independent contractors. Such a setup carries inherent risks—from worker classification issues to the absence of long-term loyalty. Working remotely since 2005, we lack a shared office culture or in-person meetings, fostering a fragmented organizational atmosphere that may deter any ambitions of scaling.
The harsh reality is that this business cannot thrive without my direct involvement. I manage everything—from sales and marketing to project oversight and administrative tasks. In a worst-case scenario where I am unexpectedly incapacitated, the business would likely crumble within a month, with independent contractors dispersing to pursue their own paths.
No Intellectual Property, No Competitive Moat
In a crowded CRM landscape, any unique value proposition becomes increasingly challenging to maintain. Often, the very vendors we partner with are also our fiercest competitors. With no intellectual property, standardized processes, or defined methodologies, we find ourselves in a real bind. Each project is unique, making the creation of templates or workflows impractical.
When a private equity firm scrutinizes my business, they’d discover there isn’t much of a business to actually acquire. No assets, no exclusivity, no competitive edge—just the operational know-how of a motivated individual.
What Do I Truly Have?
What I do possess is a functional business that works exceptionally well for me. Over the last 25 years, it has provided for my family, funded my children’s education, and laid down a solid retirement plan for my wife and me. The operations have supported many employees and contractors along the way, something I take immense pride in.
My business model is straightforward: deliver the work, bill for it, generate cash, and save what I can. Rinse and repeat. For me, this has worked seamlessly. However, it’s essential to acknowledge that this approach doesn’t necessarily cultivate transferable value. There’s no goodwill, no buyer-ready systems, no brand equity, and certainly no enterprise value. It’s essentially a one-person-centered operation that disappears without me.
Realism and Future Prospects for Similar Businesses
If your situation is akin to mine, don’t allow yourself to sink into discouragement. You might be generating sufficient cash flow, and that’s commendable. You could be living comfortably, and that’s even better. However, unless you’ve deliberately constructed your business to scale, possess structure, and think about succession, your venture may hold little market value.
And that’s perfectly fine—provided you are aware and comfortable with your business trajectory. For me, this clarity is paramount.
