If you talk to or spend any time with the P/E and investment firms scouring the planet for potential acquisitions you quickly realize they all need the same basic thing. They need to efficiently seek out viable candidates to put into their prospect "funnel".
As a business owner you most likely get calls from a variety of these firms and investment groups, or agents regarding the future transition of your enterprise. Introductory level conversations are the top of their marketing/acquisition funnel. My advice is take advantage of this opportunity, not as a exit now goal but as a value growth opportunity, no matter your timeline. They have market data you need!
Drilling down into the data of your business, completing regular due diligence assessments of your business and growing intrinsic value is a process that should be ongoing , all the time. Having a current assessment will also put you in position to take advantage of calls when they come in from the P/E firms, investors, competitors, and the like.
Use them as to improve your data. Your company specific data in not enough. You need to add market positioning data. They have it. Data of your business is where value growth starts. Uncovering weakness and areas of improvement helps you manage value growth. What you company specific data does not do very well is give you a solid idea of the market position your business is in.
The best path is to take your due diligence assessment, use a DCF ( discounted cash flow analysis) with a discount rate that corresponds to your operational and your MARKET position within the industry. Include in your valuation how your business interfaces within the industry you serve. Market position. Market Position ( here is where you can gain intelligence from the investment firms calling you)
Market and competitive dynamics play into a company’s valuation. These are especially important when your industry valuation benchmarks are not representative of the niche your business is in.
Small private firm's are usually not average. They are above or below. Usually they operate in a more specific geographic area or in a corner of a larger industry or ecosystem. Market position of a small enterprise is not always easy to identify. The beauty is the firms calling you have the market data.
They can help you identify where you are in terms of market share. Use them as a resource to uncover value growth opportunities for your smaller enterprise.
Here are some key elements of assessing a company’s market position. For small niche firms you can still hold a market leading position. Being a small fish is ok, the goal is where can you be the best swimmer, in your pond.
Market Leadership: who has the highest market share? How hard will it be to take share?
Competitive Landscape: How crowded is the space? Investment Saturation: how much “smart” (i.e., investor) money is in the space?
Fragmentation: How much opportunity is there for M&A? How many actionable targets exist?
For private small business value is entirely company specific. Risks must be identified and continual assessment is required to measure it.
Then add a market positioning assessment and actions toward leadership in your small pond. The larger M&A world has the market data, they use it every day.
Use them to gain more insight.