Your Growth Strategy is Your Best Exit Strategy

 By: Mark Gaeto – Managing Partner

A successful company exit starts with being able to achieve the owner’s strategic vision. That vision can only be realized by executing an effective growth strategy. So what about you? Are you planning on exiting your firm at valuations that provide you with financial security for life?

It’s no surprise that a business owner’s vision is what drives a company’s growth efforts. Strategy and action are what enable this vision. But owners and CEOs often find it difficult to articulate and implement their vision and strategy. This in turn undermines their desire to consistently grow the business and eventually exit at desired valuations. Why? Because sometimes a complete strategic vision and the plans to make it happen are either too sketchy or too overdone. This makes the vision impossible to grasp, since there are just too many components to consider. At other times, efforts are not properly communicated, assigned, managed or measured, and accountability is unclear.

We find all too often that owners struggle because they don’t have a working model to capture the essence of their vision, to communicate it, and then to implement a strategy to achieve it. One model that we’ve helped owners implement is described below.

First Step – A Growth Vision and Strategy Development Model

This model is designed to get right to the point of growing a middle-market business. The first step is to create a vision statement — tell employees where they are headed. It is not a simple mission statement meant to show a company purpose. It is not merely a set of objectives. However, it is not a detailed 100-page business plan either. A vision statement is concise and defines what direction the company is going, how it will get there, who is responsible and accountable, why the company excels against competitors, and why it expects to be successful. The best vision statements are about 300-500 words in length and answer four core questions: Where is the firm going? How will the firm get there? What is the competitive advantage? Who is accountable for executing the plan? By first setting a vision, CEOs help their teams answer the following:

  • Where – Clarify market needs and determine your target market opportunities.
  • How – Get your financials straight so you can understand margins and cash flow in detail. We recommend an independent review of your books to ensure they are on an accrual (GAAP) basis. You need to understand how the firm produces cash. You may want to evaluate how you contract with clients (contracts are of paramount importance) and price your offering.
  • How – Appraise internal efforts and adjust or develop new functional strategic initiatives under one integrated plan led by the business owner and the core leadership team.
  • How – Determine how your company will go to market and effectively grow sales and market share. Again, dig into your pricing structure, as most firms under-price or give services away, which hurts margins and ultimately cash flow — a fundamental metric used when valuing a firm.
  • What – Determine how the firm excels and what its competitive advantage is. The questions to answer are: Why are you different? Why does that matter to customers? If it does matter to customers, why should they buy from you over competitors, and why buy now versus later?
  • Who – Mobilize; communicate the vision and plan to the employee base. Then execute.
  • Who – Measure regularly! Set priorities and metrics, and identify who is responsible and accountable for executing functional initiatives (and overseeing their corresponding budgets).

Second Step – Bounding and Grounding the Vision

To develop a realistic vision, CEOs need to look hard at the facts in front of them. They need to face reality and proactively deal with it to “bound and ground” their vision. CEOs need to identify, document, analyze and fully understand what limits them and what allows them to succeed in their given business environment.

These constraints and enablers can be broken down into internal as well as external limits. Internal limits are those determined by the company itself. External limits reflect the significant forces outside the company, such as funding or financing trends, customer and market trends, regulatory trends, technology trends, competitive position, talent acquisition and retention, etc.

Whatever vision the company chooses to pursue, it needs to understand these bounding and grounding factors. Goals, such as sales or EBITDA targets, determine the aggressiveness of the vision.   One idea is to set up a CEO dashboard. I used a weekly flash report to help me drive initiatives, motivate people and make decisions. If you want to see that dashboard, I’m happy to share it with you via email.

Third Step – It’s All about Focus and Management Execution

It’s clear that owners who can create a firm with core operating components, as well as a team that consistently delivers revenue and margin growth, create greater shareholder value — which means higher exit outcomes or valuations. Strategic and financial buyers are beginning to realize that, when evaluating firms, operational capabilities and intellectual property will carry more weight than  analysis based simply on financial engineering. In addition to financial value, these buyers seek technology and operating value. They understand that in today’s environment, easily obtained gains are increasingly difficult to find, and financial re-engineering is only short-term and really requires operating abilities to sustain. Simply put, a bounded and grounded company vision and strategy, plus management execution, equal higher valuations.

Mark Gaeto is a managing director with Falcon Capital Partners, a leading mergers and acquisitions firm, where he directs their commercial technology practice.

Mark can be reached at 610-989-8903 or