Ever wanted to get inside the mind of a private equity investment expert? Alliance Virtual’s own CEO Frank Cottle began his career in private equity investment, buying and building businesses for sale. In his latest podcast with John Warrillow of Built to Sell Radio, he shares insights on how to add value to a business in preparation of sale.
If you know Alliance Virtual Offices, you’re probably familiar with our CEO Frank Cottle. He regularly pops up here on our virtual office blog offering advice about how to grow a business, or discussing the latest trends in flexible workspace.
But did you know that, prior to building a global business center and virtual office network, Frank was part of a successful private equity investment group?
In his latest podcast, Frank discusses one particular acquisition in which he bought and developed a data aggregation and reporting company, eventually selling it to Lufthansa at a much greater value.
During the interview with John Warrillow of Built to Sell Radio, Frank’s episode – ‘Inside the Mind of a Private Equity Investor‘ – delves deep into the acquisition and growth process. Get to grips with insider details such as how a stock re-capitalization works – “companies never die, they just get re-capitalized” – recognizing the hallmarks of a potentially ‘good’ investment deal, and how to add value to a business before sale.
In the second half of the interview, Frank explains some of the common mistakes that can slow a business transaction. These are particularly rife among small business owners, so be warned – these classic errors could ultimately leave you out of pocket.
The most common errors according to Frank are:
- Business owners don’t understand their industry holistically: They know their company but they’re not able to make longer-term decisions on trend shifts. This is often because they focus too closely on their own geographic market – but that’s not where the world is going. It’s important not to get trapped inside your own company. Get elevation and look down on your industry to see the bigger picture.
- Emotional attachment: Too many smaller companies, which Frank defines as those in the 1-5million dollar revenue range, are worried about personal affairs such as their households. But the buyer is not worried about those things – they’re worried about growth. If the buyer and the seller are focused on different concerns, deals don’t always come together.
- Time: “Time kills more deals than anything else” says Frank. The problem is that deals are often dragged out due to indecisions and sellers taking too long to respond to queries or requests. This is often because the business owner is going through a dilemma about selling their business and whether they’re doing the right thing. Be sure to make your decision as early as possible and stick to it.
Towards the end of the interview, Frank discussed the flexible office industry and some of the insights he has gained from 35 years in the serviced office and virtual office market.
“We, as Alliance, were a pioneer back in the early 1980s. We’re now seen as one of the largest, stable and most diversified companies in the industry.”
Commenting on global trends, Frank explains: “What’s really interesting is the way companies are virtualizing. Today, companies have lots of different offices in different locations rather than one central HQ. Over the last 5-7 years, since the beginning of 2007-08 recessionary period, the virtual office industry has really taken off.
“Trends in mobility in the workplace and in technology have had a huge input as well as employment practices. For instance, companies like Cisco are getting bigger but they’re taking less office space, because the people they hire are contractors not employees.
“Globalisation, contracting, diversification of infrastructure based on technology, and allowing people to live and work where they want — all of these ‘mega trends’ are impacting our industry. As a result, our industry is growing at a rate of 12-13% per year, every year. That’s faster than the PC industry in the height of the dot com era.”
Listen to the full interview between John Warrillow and Frank Cottle here:
Read more on this topic in John Warrillow’s article for Forbes, featuring Frank Cottle.