A lot of entrepreneurs and business owners in the digital services, marketing, or managed services industry get to a point where they want out.
It’s hard work and, after growing your business to a point, you might start thinking about your exit strategy and how to transition your business—and life—into the next phase.
And this is exactly where Todd Taskey, guest on a recent episode of the Stride to Freedom podcast. Todd is an M&A advisor with Potomac Business Capital and works with digital marketers and entrepreneurs who want to exit their business and realize the equity value they’ve created.
But it’s not as simple as just selling your company to the highest bidder—here’s what you need to know about M&A for the digital services industry.
Mergers, Acquisitions, and More
M&A stands for “mergers and acquisitions,” and is typically what people think about when they want to exit their company—it’s an exit strategy.
But Todd’s business is not necessarily to only perform exit transactions, but evolutionary transactions.
It really comes down to one question: what’s the best path forward for me and my business?
Sometimes it’s to sell 100% of the equity of your company, take the cash, and live your life. Other times, a merger is most appropriate—you have reduced equity with a bit of cash in hand. Or there’s some combination of the two, where you sell off some shares and keep the others.
Whatever the case is, it’s Todd’s job to figure out the best option for your business in the future.
In his experience, business owners often come to him just wanting out—they’re ready to give it all up, take the cash, and run. But after working with Todd and understanding the value they created in their business and their options for M&A and beyond. Some clients end up staying in a new capacity and thriving in their growing business.
How to Realize Equity Value
For companies ready to sell their business, what’s the process?
According to Todd, it starts with running a good business. In practical terms, this looks like:
- High customer retention: How long do your customers stay with you? And how much recurring revenue are they bringing in?
- High employee retention: Do your people like working for you? Retention rates speak more to company culture than anything else.
The next factor is to evaluate your financials. For any private equity firm to consider buying your company, the financials need to be rock solid and stand up to inspection and pass through escrow. This is where Stride Services can help
Lastly, you need to tell your story through data. Information like customer retention, diversification, finances, and more all tell the story of your businesses success. This is what gets put together in a pitch deck to investors, so it needs to be compelling and meaningful.
How to Sell Your Company
Todd works through all the above points with his clients over a series of one-hour calls. Each call is detailed and in-depth, so every aspect of the business is understood and analyzed.
At the end of these exploratory calls, companies may realize that they haven’t created the value they want to yet—they’re not ready to sell. They can then go back, work on those things in their business, and revisit selling once they’re operating at higher value.
But for those who want to take the leap, Todd works his relational magic to connect with private equity firms who are looking to buy that exact type of business. The next steps include:
- Initial conversations with interested companies (ideally 3-5)
- A letter of intent (LOI) with one interested party
- Due diligence period for 60 days
This is just a flyover look at what you can expect when considering selling your company.
If you want to learn more about it, make sure to listen to the full interview with Todd Taskey on Stride to Freedom podcast where he shares real-life examples of his closed deals. You can also connect with him on LinkedIn or listen to his own podcast, Second Bite.
This Stride Live Webinar is hosted by Stride Services. Stride is a comprehensive financial solutions provider, specializing in outsourced bookkeeping, accounting, tax, and advisory services for Managed Service Providers.
If you’re interested in being a featured guest on our Live Webinars or if there’s a subject matter expert you’d like us to interview, please let us know!
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Show Notes + Transcript:Â
Todd Taskey: LinkedIn
Potomac Business Capital: Website/LinkedIn
Todd Taskey: Email
Webinar Transcript:Â
Exploring M&A for Digital Service Entrepreneurs with Todd Taskey, CEO of Potomac Business Capital
