Insights of a Maverick Investment Banker_Sample

SEVEN PITFALLS TO AVOID WHEN BUILDING FOR SALE
Top Line Focus
The fast growth of the early years will not last forever. At some
point the business will exhaust its profitable niche and will be
forced to enter markets on the fringe of its core competence,
where growth will come at the expense of eroding margins.
The founder is often the engine of value creation, so it is
unavoidable that profit margins fall as his impact is becoming
spread thinner in a growing company, over time. Scaling helps
reduce proportionate expenses, but corporatization often
alienates people and attracts slackers. It takes the focus and
ruthless discipline of Jack Welch to constantly weed out subpar
performers.
The top line is often easy to grow at the expense of
profitability by taking on marginal projects. Your company must
avoid commodity terrain by shifting attention to R&D,
innovation and marketing. It will have to say no to marginal
customers and opportunities, and constantly fine-tune, even
shift, its offering to stay in a differentiated and valuable market
position.
Buyer Becoming Boss
The difference between a business and an outsourced provider
is independence. It means serving multiple masters, none of
which can blackmail you into giving up your profits or strategy.
Interdependence sounds nice, but rarely works in practice, as
customers will loath to expose themselves to the performance
risk of a single contractor and therefore will seek to keep multiple
providers in play.
Independence costs focus and performance and profits in the
short term. However, when sales are concentrated with one or a
handful of customers, the business faces the risks of exposure to
the loss of key clients, weak position in price negotiations, and
when a buyer dictates terms, the inability to develop proprietary
products.
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