Dear owner(s),

Here are a few thoughts as you consider selling your business.

Most owners spend the better part of their lives building their companies. Through years of repetition, judgment, mistakes, and recovery, they sharpen their instincts in sales, purchasing, hiring, culture, customer service, and cash management.

Selling a business is different. Most owners do it once. It often happens in an emotionally charged atmosphere, with pressure coming from family members, advisors, buyers, investors, lenders, circumstances. Because the decision is so important, financially, personally, socially, it can become more prone to error rather than less. And mistakes made in the once-in-a-lifetime sale of a business are rarely reversible.

Price matters. And as most advisors are paid only if a transaction closes, and as a percentage of the valuation, it is expected and human that they focus more on the price than on what happens to you and your business after closing. But price is often not the only important issue, and sometimes not the most important one depending on your goals post-sale. Also, if you own an excellent business, it is likely to become more valuable over time. If you choose not to sell now, you may well receive more money later. That knowledge should let you deal from strength, take your time, and select the buyer you actually want.

Beyond price, you may care deeply about what happens to your employees, customers, partners, local community, and reputation. You may also care about your own life after the sale: your role, your agency, your lifestyle, your standing, your purpose. Those are not sentimental issues. They are central issues that may be worth a great deal to you.

If you decide to sell, we believe Perpetuo offers advantages most buyers do not. 

Most buyers fall into one of three categories:

1. The ‘Strategic’ buyer

   No matter what is promised, such a buyer usually has managers who believe they know how to run your business better. Sooner or later, they will want to “help”, then apply their own systems and “best practices”. Autonomy promised before closing often becomes supervision after closing. Eventually your people will be pointed out as not fast enough, not educated enough, not willing enough, not compatible enough. Maybe you too.

2. The financial buyer of some sorts

   Whose plan is to resell the company when timing is favorable, ideally within 5-7 years. To generate an attractive return over such a short period, they may need to use significant debt, push aggressive growth plans, force acquisitions, cut costs, or prepare the business for the next buyer. More often than not they will want to “supplement” your team, when not significantly change it. Your company may become a “platform” expected to absorb others, or an “add-on” absorbed into someone else’s platform. Either path creates bureaucracy, cultural and people strain, loss of control, and sometimes burnouts. When not destroying fine businesses by trying too hard to make them grow too big too fast too leverage.

3. The search fund or independent sponsor

   These buyers are often earnest and personally motivated. But their model commonly assumes current ownership can be replaced after a short transition, many missed opportunities can be quickly captured, and often romanticize small businesses and underestimate their challenges and stress. They too need to sell the business soon, usually in hopes of moving to the next, bigger, one. They usually bring multiple co-investors into governance, adding approval rights, opinions, and complexity.

We find it very telling that these buyers describe what they will do to your business as “flipping” it. Upside down. Like a pancake. So if your only objective is to cash out and put the business behind you, or if you are craving for a big adrenaline rush, any of these buyers may be satisfactory. There is nothing wrong with that. But if your business is the creative hard work of sometimes decades, and if its people, name, workings and future still dearly matter to you, these buyers have real limitations.

Perpetuo is different.

We buy to keep. We are building a permanent home for exceptional small businesses, inspired by Berkshire Hathaway’s model and focused on America’s small business owners who are the backbone of our economy. We do not buy companies in order to ‘flip’ them (such an ugly idea in our minds). We do not have an operating team waiting to take over. We do not promise MBAs, consultants, relatives, or executives the right to run businesses acquired from owner-managers.

Any buyer will tell you they need you after closing. If they are intelligent, they do. But many buyers’ later actions do not match their earlier words. Their structure eventually overwhelms their promises. Our structure is built around the opposite premise: remain very small, because the business is most likely to thrive if the people who made it successful remain motivated, respected, and in charge of daily operations.

That is why we want the existing leadership to remain our partner, retaining a meaningful ownership stake and dividend interest, often at least 20%, and to continue running the business with substantial autonomy. We do not want to buy unless the people who matter most are genuinely excited to remain our partners.

We adapt to the company’s methods rather than forcing the company to adapt to ours. We will be involved in a few important areas such as strategy, business planning, capital allocation, major people decisions, incentives, stewardship, and reputation. We will care deeply about how the business uses cash and compounds it over time. But most of what happens every day should remain with you, given you know the business best.

We also intend to be useful. We have experience and distinguished track-record running, growing, improving, and repairing several businesses across many sizes and situations. When you want advice, a second opinion, or a sparring partner, we will pick up the phone. When you do not need us, we will not manufacture work for you.

You will also know exactly who you are dealing with. You will not negotiate with one executive, only to discover later that someone else is in charge. You will not be told that an investment committee, fund deadline, or future buyer now requires a change in direction. Our decisions are made by me, owner and controller of our company.

It is only fair to say that a sale will probably not make you richer in an economic sense. If you own a valuable business, you are already wealthy and soundly invested. Selling changes the form of your wealth from a company you understand deeply into cash that will likely be reinvested into smaller pieces of businesses (stocks) or other assets and instruments you likely less fully understand. There are many sound reasons to sell, but in a fair transaction the seller will become more liquid, but not richer overnight. If you wish, we would welcome and be honored by the possibility of you investing some of your new liquidities alongside us in Perpetuo, so you can own a piece of the many enduring businesses we hope to own over time.

I will not pester you. If you have any possible interest in selling, I would appreciate you reaching out. I would be proud for Perpetuo, alongside you and the key members of your family or team, to own your business. I believe we would both do well financially. More importantly, I believe you could have as much fun running your business over the next ten years as you have had during the past ten.

Sincerely,

Cyril Grislain

Founder & CEO

cyril.grislain@perpetuogroup.com