Secure a Bigger Payout by Selling to an Operating Company

About the Episode

In this episode, you’ll learn the difference between selling your business to a holding company versus an operating company. You will discover how your choice of buyer impacts your role after the sale, your team’s future, and your second payout. Understanding these buyer styles will help you avoid lowball purchase offers and boost the value of your future sales and bonus payouts.

We want owners focused on growing their business. We don’t want them focused on closing the books every month or the intricacies of HR policy. We want to take that off their plate so they can focus on running their crews efficiently, finding new business, and expanding their company.

David Noble

What You’ll Learn

• Understand How Your Buyer Runs Their Business: When evaluating buyers, check whether they plan to leave your business alone (holding company) or merge your day-to-day operations into their main company (operating company). If you pick the wrong buyer style, you risk getting stuck with extra work and accepting a lower sale price.
• Get A Second Payout When The Buyer Sells: You can keep a small share of your business during the sale so you get paid a second time when the buyer sells the larger company down the road. If you sell to a buyer who fails to grow the combined business, your remaining shares will lose value, reducing your second check.
• Hand Off Daily Admin Work To Grow Sales: With an operating company, you can often transfer tedious tasks like bookkeeping, payroll, and HR paperwork to the buyer’s main office so you can focus on bringing in new customers. If you stay buried in daily admin work, your sales will stall, and you risk losing post-sale bonus payouts.
• Set Up Simple Systems To Protect Your Legacy: Partner with a buyer who trains your staff and establishes clear routines so your business keeps running smoothly after you retire. If the business relies entirely on you to make daily decisions, your company’s performance will drop after you leave and your employees’ jobs will be at risk.
• Use The Buyer’s Tools And Network To Grow Faster: Joining a larger operating business lets you learn proven tricks from peer owners while tapping into extra cash, new sales tools, and client leads. If you try to grow your business completely on your own, you’ll likely struggle to hit your targets and risk walking away with a smaller final payout.

Topics Covered 

Want More? Related Resources:

• Selling to a PE Firm as Part of a Roll-up
• Earnouts When Selling or Buying a Business | Complete Guide
• M&A Guide | The 4 Types of Buyers of Businesses

Meet Our Guest

Brandon Blewett

Chief Development Officer of Pave America

Brandon Blewett is the Chief Development Officer of Pave America, the largest private-equity-backed paving platform in the United States, where he has helped roughly double the company’s size, growth driven largely by M&A. He leads the full deal lifecycle, from sourcing and diligence through negotiation, close, and post-close integration, and has been involved in more than $210 billion of M&A activity across his career. He is an Amazon best-selling author (How to Avoid Strangers on Airplanes), a contributing author to Leadership DNA, and a commentator featured on more than 70 media outlets. He holds a JD and an MBA.

LinkedIn: https://www.linkedin.com/in/brandoncblewett

Meet Our Guest

David Noble

Head of Value Creation at Pave America

David Noble is the Head of Value Creation at Pave America, a private-equity value-creation leader and former Bain & Company consultant with a Kellogg MBA. He specializes in transforming multi-site services businesses through pricing, operational excellence, M&A integration, and analytics. In a prior role as Chief Strategy and Transformation Officer at a sponsor-owned services platform, he led an enterprise transformation that delivered more than 700 basis points of margin expansion in its first year and built standardized operating procedures across more than 160 locations.

LinkedIn: https://www.linkedin.com/in/david-noble/