Why the Right Narrative May Increase Your Payout with Buyers
Too many business owners view their growth stories—the tales they tell about their businesses from inception to expansion—as little more than promotional tools. In reality, your story can be critical to how buyers assess the value of your company when you decide to sell.
Done well, your growth story will show M&A buyers the current strength of your business and the clarity of your vision, as well as painting a detailed picture of a favorable future. It’s one of the most effective ways to convince the investors at the table that your company is worth investing in, and at a premium valuation.
In this post, I’ll share more details on this core component of our proven Value Creation Formula, including the elements of a strong business growth story and tips on how to construct your own.
What is your growth story?
Your growth story is a cohesive narrative showing where the company has been, where it is today, and, most importantly, where it’s headed under new ownership. It needs to present a compelling case for continued value creation even after you exit.
This story consists of more than inspiring words and marketing fluff. It also contains data showing the whole arc of how a company has scaled and will continue to scale. A buyer is paying for the future, and the data—such as audited financials, verifiable KPIs, and customer retention metrics—is what will convince them to open their wallet.
The most effective and strategic business growth stories acknowledge challenges the company has faced and discuss how the leadership navigated them. Conceding setbacks builds buyer confidence more than a sanitized version of history, especially if you can point to processes you changed due to lessons learned.
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Buyers gaze forward
It’s easy for you as a business owner to talk about the past and present, because you’re rightly proud of your accomplishments. But you need to understand the buyer’s mindset: because they’re paying for performance down the line, the narrative about the future is actually the most important part of a growth story. And the forward-looking section of the growth story must reflect an underlying growth plan.
The motivations tend to be different based on the type of buyer.
Are you dealing with a private equity firm? Then realize they’re projecting 3–7 years of ownership and hoping to triple their money in that time. Is it a strategic buyer? In this case, the new owners want your business to help with things like expanding their total addressable market, moving into rich new product lines, or vertically integrating key portions of their supply chain.
The data you present should address how these things will be possible under the new ownership. And the forward-looking story must flow logically from historical and present performance: A company that’s grown 5% annually can’t credibly claim it will grow 25% next year without a clear, specific explanation of what’s going to change.
But if you can convince the buyer that 25% annual growth is possible, they’re likely to pay handsomely for the privilege of boarding this train.
A real business’s growth story in action
Over the years, we’ve seen myriad different examples of carefully crafted growth stories that helped secure strong valuations for Class VI clients. One client, who we’ll call ABC for the purposes of this post, offers a perfect example of how a shift in the narrative can significantly impact buyer perception.
ABC designed equipment and processes that help disparate industrial systems work together seamlessly. They sold their integration solutions in a range of industries, but some of their biggest customers were oil and gas firms needing their system controls to talk to each other.
This made the growth narrative tricky. Even though ABC’s operations and financials were humming along nicely, prospective buyers needed to hear the truth that the company’s revenue wasn’t tied to the notoriously fickle energy markets. Rather, the high quality of ABC’s services mattered much more than the price of oil.
Thankfully, the leadership had already proved it could diversify its customer portfolio into areas like data centers, manufacturing, and food and beverage production. Class VI used this expansion to tell a persuasive story about the company’s bright future that intrigued investors and ultimately led to a favorable valuation.
How do you build your narrative?
Like every part of the M&A process, it’s better to be meticulous in crafting your growth story than to leave anything to chance.
Here’s a simple framework we use to help companies make compelling, data-backed narratives geared toward a buyer’s mindset:
- Gather the evidence. Collect clean financial data and customer concentration numbers showing the arc of the last five years, regardless of what type of company you lead. Then assemble any industry-specific numbers that might be relevant to buyers in your vertical, such as customer retention and churn rates or production downtime.
- Map your narrative arc. Identify the key chapters in your story, such as early traction in your market, the decisions you made while scaling, and how your current position is building momentum for the future. Be honest about pivots or downturns and frame them as proof of adaptability.
- Articulate the forward-looking thesis. Define three or four specific, credible growth levers with supporting evidence. Quantify the opportunity where possible (e.g., “expanding into the Canadian market represents a likely increase of $30M in revenue according to [believable data source]”). Avoid vague claims.
- Put it through the ringer. Your M&A advisors can help stress-test the growth story before you present it to a prospective buyer. An experienced team should be able to find any gaps in the story so you can fill them and shore up potential weaknesses. If a claim can’t survive friendly scrutiny, it won’t survive due diligence.
- Embed the story everywhere. The growth narrative should be consistent across the confidential information memorandum (CIM), management presentations, data room materials, and live conversations with buyers. Rehearse interactions with your team to increase everyone’s confidence. Inconsistencies erode trust fast, and the buyer will pick up on them.
It’s important to start step 1 at least a year before a transaction, and giving yourself more time is even better. This can help alleviate any rush at the last minute and ultimately make you and your trusted team more practiced and confident.
Go tell your story
A growth narrative is just one component of your M&A journey, but it’s an important one. Due diligence is more stringent than ever, and investors love a safe bet. A compelling growth story can help your company seem as close to a sure thing as possible.
Reflect on the arc of your business. How would you tell your growth story today, and where does it seem thin? Where do holes need patching? This is hard work, but you’re used to working hard—and I hope it pays off when the wire transfer hits your account!