Ibrahim Abdel Rahim’s Post

SME founders: here’s what buyers are looking for I was asked about this on the TechExits podcast, so here are some of the main criteria search fund entrepreneurs look for in SMEs. If you are preparing to sell, focus on these four areas: 1️⃣ 𝗚𝗿𝗼𝘄𝘁𝗵 𝗺𝗼𝗺𝗲𝗻𝘁𝘂𝗺 Buyers want to see consistent growth and a clear path forward. If the economy is slow, growth through acquisitions can also be a valid strategy. 2️⃣ 𝗛𝗲𝗮𝗹𝘁𝗵𝘆 𝗺𝗮𝗿𝗴𝗶𝗻𝘀 Strong margins make the business more attractive and give buyers confidence in the quality of earnings. There will be years when you want to invest in team members and product, but if your plan is to sell the company, it may be better to make sure you have the right balance of growth and margins. 3️⃣ 𝗟𝗼𝘄 𝗰𝘂𝘀𝘁𝗼𝗺𝗲𝗿 𝗰𝗼𝗻𝗰𝗲𝗻𝘁𝗿𝗮𝘁𝗶𝗼𝗻 You can build a great business with a single major client, such as a public sector entity. However, that is often not a sellable business for search funds. If one, two, or three customers represent a large share of revenue, buyers will see that as risk. Customer diversification is a key requirement. 4️⃣ 𝗣𝗿𝗼𝗱𝘂𝗰𝘁 𝘀𝘁𝗶𝗰𝗸𝗶𝗻𝗲𝘀𝘀 (𝗹𝗼𝘄 𝗰𝗵𝘂𝗿𝗻) This is especially important in software. High churn weakens the case for durability and future growth. These four metrics matter a lot, but timing is also near the top of the list. If possible, sell after a few years of strong performance, when the business has clear momentum and healthy margins.

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