Understanding The Why: Purpose Driven Objectives

In any business engagement, whether it’s selling a company or securing capital, understanding the underlying motivations—referred to as “the why”—is crucial. Knowing the objectives, goals, and aspirations from both a business and personal perspective can significantly impact the success of these transactions. Here, I delve into the importance of understanding these purpose-driven objectives and how they influence the process of selling a business.

Introduction

When it comes to business decisions, especially those as significant as selling a company or securing capital, understanding the why behind these decisions is paramount. It’s not just about the financial metrics; it’s also about the personal motivations and objectives of the business owner and stakeholders. This comprehensive understanding helps in structuring the transaction in a way that aligns with these deeper motivations, leading to more successful outcomes.

The Why, and Why It Matters

The Importance of Understanding the Why

Understanding the why involves digging deeper into the motivations of both the business owner and the prospective buyer or investor. It’s about knowing what the business owner aims to achieve beyond the financial aspects. These objectives could include preserving the legacy of the business, ensuring the well-being of employees, maintaining customer relationships, and contributing to the community.

For example, when structuring a transaction, it’s essential to consider not just the financial components but also the personal objectives of the seller. This holistic approach ensures that the sale or capital raising process respects and aligns with the broader goals of the business owner.

Challenging Common Misconceptions

There is a common misconception in the investment banking and M&A advisory world that every deal is driven solely by the highest bid. This perception couldn’t be farther from the truth. In reality, many business owners are deeply invested in the future of their company and its stakeholders. They care about their employees, their legacy, their family, and their community. Therefore, non-financial factors often play a crucial role in their decision-making process.

In my experience, business owners, especially those with privately held, family-owned, or entrepreneur-led companies generating significant EBITDA, prioritize these non-financial considerations. They want to ensure that their employees are well taken care of, their legacy is preserved, and their customers continue to receive the same level of service.

Objectives & Priorities

Proactive Discussion of Objectives

In any engagement, it’s vital to proactively address these objectives from the outset. By understanding the why early in the process, we can better tailor our approach and ensure that the transaction aligns with the business owner’s goals. This involves having open and honest conversations about what the owner wants to achieve, both personally and professionally.

For instance, some business owners might prioritize maintaining the company’s name and brand, while others might be more concerned about the welfare of their employees. By understanding these priorities, we can find potential buyers or investors who align with these values, increasing the likelihood of a successful transaction.

Customization Based on Priorities

Different business owners have different priorities. Some might be open to being part of a larger roll-up or consolidation effort as long as their employees are taken care of. Others might insist on retaining the company’s name and brand identity. Understanding these nuances allows us to customize our approach and find the right fit for each unique situation.

By addressing these priorities, we can structure transactions that respect the business owner’s values and objectives. This not only ensures a smoother process but also builds trust and satisfaction among all parties involved.

Closing Thoughts & Conclusion

Benefits of Understanding the Why

Understanding the totality of the situation—the what, how, when, and why—vastly increases the probability of finding the right buyer or investor quickly. It allows us to identify parties who are not only financially capable but also aligned with the business owner’s personal objectives. This alignment leads to more meaningful and lasting business relationships.

By comprehensively understanding the why, we can better navigate the complexities of business transactions. It enables us to structure deals that are not just financially sound but also emotionally and ethically satisfying for the business owner.

Conclusion

In summary, understanding the why behind business decisions is essential for successful transactions. It involves recognizing the personal and financial objectives of the business owner and aligning these with the right buyer or investor. This holistic approach ensures that all aspects of the business and its stakeholders are considered, leading to more successful and satisfying outcomes.

Maintaining this focus on purpose-driven objectives allows us to do our job best. It increases the probability of finding the right parties faster, ensuring that the business continues to thrive under new ownership or with new capital. By prioritizing the why, we can achieve the optimal outcome for everyone involved.