The Secret Behind the 20% of Businesses That Actually Sell

Welcome back to the Mid Market Insider!

Today, I’m diving into what the 20% of businesses that sell do differently, and how you can position yours to be one of them.

Valuation gets all the attention.

But here’s the truth: “sellability” is what really matters.

Multiples don’t mean much if the business isn’t predictable, transferable, and prepared.

In my experience built on nearly 20 years in private equity, I’ve noticed that the businesses which command premium outcomes share three traits: they diversify, they systematize, and they strategize.

Let’s dive into each one:

Step 1: Diversify

Most owners think diversification just means avoiding customer concentration.

That’s part of it, but it’s not the whole picture.

True diversification includes reducing:

• Revenue concentration risk: Mix by industry, geography, channel, and revenue type. If revenue is diversified, the slow down of one segment will not lead to a collapse in cash flow.

• Key man risk: Key man risk is usually the owner but sometimes another critical team member. If the company can’t run without one person, that should be an immediate area of focus.

Step 2: Systematize

Shooting from the hip works when you’re small. But as companies scale, disorder eventually creates a ceiling.

Systemization creates confidence for your team and for potential buyers.

Two areas stand out most:

• Financial reporting: Income statements may look backward, but buyers use the past to judge the future. Clean, consistent reporting signals reliability.

• Processes: If a process only lives in someone’s head, it’s a risk. Documenting and standardizing tasks makes the business transferable.

By reducing disorder, people have more space to innovate and lead.

Step 3: Strategize

The companies that reach $10M+ don’t do it by accident. They have a defined strategy in two key areas:

• Growth: Is your strategy written down and actively executed, or is it just in your head? Does the company even have a strategy?

• Differentiation: Why do customers choose you over someone else? If your only answer is “great service and quality,” that’s what everyone says. A true differentiator goes deeper.

Diversifying and systematizing are part of the strategy, but without a bigger picture, they risk becoming disconnected tactics.

Yeah so valuation may get all the headlines…

But when you peel it back, the businesses that actually sell (and sell well) are the ones that are diversified, systematized, and strategic.

That’s the foundation buyers are really paying for.

Reader Question of The Week

For context, this is a recent section I’ve decided to add. After receiving many questions in my day-to-day as the co-founder of Four Pillars, I wanted to share the most common ones in my newsletter in hopes that it’s valuable to you in some way.

If you have a question you want answered in a future newsletter, please reply directly to this email and I’ll do my best to answer it. Now, onto this week’s question:👇

Q: “With the advent and prevalence of AI, surely there are some good valuation calculators out there. Do you have any you would recommend?”

I have been holding back this question for this particular issue. Honestly, I don't love valuation calculators because they instill a false sense of confidence or security.

Business owners need to focus on these three topics first. Once these three are adequately addressed, then the focus POSSIBLY could shift to valuation.

That’s all for today’s newsletter! Thanks for reading!

📅 Next Week:

Next week, I’ll be diving into what’s happening in the M&A market this month, some key movements in the industry, and what you should keep an eye out for as a business owner.

Keep building,
Nick

P.S. 

If you want to discuss your business goals in greater detail, book a discovery call: