Private Equity and Venture Capital firms are on the acquisition trail and arguably driving up the price of those businesses that meet their criteria as a result – but what are those criteria?
One of the most desirable capabilities to build in your business is the right team. It’s often said that a killer team beats a killer App every time, but why?
Everyone knows that the market is a dynamic environment. There are new entrants, new ideas, new products, new services all the time, any one of which can pose an existential threat to a business armed only with a Killer App, product or service. A killer team, on the other hand, is more likely to embrace and even lead that dynamic market – to be the ones posing an existential threat to other people’s business models and responding dynamically to market events rather than wondering what just happened.
I have heard it said on numerous occasions that Investors would far rather back the jockey than the horse; if the horse under-performs, the right jockey will get another.
Developing an excellent team is a worthwhile investment. The right people in the right roles optimises business performance and profitability. The right team at operational level will enable the leadership team to have the space and time to work on the business at a strategic level where they should be operating and where their time and effort will have the greatest impact on growth and performance. The right team is also more cost effective; less staff turn-over, lower recruitment costs, less inefficiency and hidden cost during the learning curve of new team members, less management time spent dealing with recruitment, less management time spent dealing with under-performing staff, or worse, doing their jobs for them.
Anyone looking to buy a business would sensibly look for the evidence that the team and culture are right during due diligence - there are usually obvious indicators when it isn’t.
Finally, shaping and developing an excellent team and culture are fundamental aspects of succession planning and in turn feed into your exit strategy; if you want to sell your business with as clean a break as possible, you need to be redundant, and potentially, the right team could well be the best people to buy your business via an MBO.
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