Selling Your Business Isn’t the Only Way to Take Chips Off the Table and Bring in Capital for Ambitious Growth

By the Canadian Business Growth Fund (CBGF)

For most entrepreneurs, the question arrives the same way. The business has matured. It’s worth real money — likely the large majority of the family’s net worth. The kids may or may not want it and competitors are consolidating and investing. Every week brings calls and e-mails from prospective buyers.

At that point, selling a majority of the business — or all of it — is often the most obvious option. You can diversify your family’s wealth and sleep better, while a well-capitalized buyer can invest more aggressively in growth. For some entrepreneurs, it’s the right answer.

But “obvious” and “optimal” are not the same thing. There’s a path that far fewer Canadian entrepreneurs consider, largely because far fewer firms offer it: taking on a significant minority equity partner.

Having your cake and eating it too

In many ways, a minority investment is a structure that lets an entrepreneur have it both ways:

• Diversify your personal wealth. A minority round structured with a secondary component — and, where appropriate, a prudent amount of debt — can let an owner take meaningful value off the table today, often as much as 50% to 60% of what the business is worth. That compares to the 80% to 90% an owner typically monetizes in a conventional majority sale. The gap is real but consider what you keep in exchange.
• Keep control. In a majority deal, you hand over the keys. The new owner sets the strategy, picks the leadership team, decides when and how to exit — and you work for them, usually with a rolled equity stake you no longer control. In a minority deal, you remain the controlling shareholder. The business remains yours: your name, your team, your culture, and your decisions.
• Keep the majority of the upside. If you believe the next five to ten years are the most valuable years of your company’s growth — and most owners we meet do — a minority structure means the lion’s share of that value creation still accrues to you, not to a new owner who bought it from you at today’s price.
• Gain an institutional partner. The right minority investor brings more than capital. They bring financial and business building sophistication, a network of operators and advisors, and pattern recognition from dozens of other growth journeys. Institutional capital on the share register also carries weight: lenders extend more credit on better terms, and acquisition targets (and their advisors) take your offers seriously. For entrepreneurs pursuing growth through M&A, that credibility is often the difference between a letter of intent that gets engaged with and one that doesn’t.

The trade is straightforward: monetize somewhat less today, in exchange for keeping control, keeping most of the future upside, and gaining a partner whose only job is to help you grow what remains.

What this looks like in practice: growth by acquisition

At CBGF, we’ve now partnered with more than 30 Canadian businesses, and many of our entrepreneurs have used minority capital precisely this way — as fuel for consolidation strategies they lead and control.

• A national environmental management platform: The founder set out to build a national environmental management company. With CBGF’s minority investment behind him, the company executed dozens of acquisitions across the country, growing from a regional waste services business into one of Canada’s leading environmental management platforms — with the founding team in the driver’s seat throughout.
• A multi-province collision repair platform: The co-founders had a vision to consolidate Canada’s fragmented collision repair industry from their base in Western Canada. CBGF’s growth capital allowed the company to acquire shop after shop across Western Canada and beyond, building a multi-province platform while the founders retained control of the company they started.
• A national specialty medical clinic platform: The co-founders are building a national platform of cardiology, respirology and internal medicine clinics, partnering with physicians who want relief from administrative burden without giving up their practice’s identity. Minority growth capital lets the platform move quickly on clinic partnerships while management charts the course.

For those growing organically

Acquisition isn’t the only use of growth capital. Other CBGF entrepreneurs have used minority investment to fund organic expansion — new markets, new capabilities, and new capacity:

• A digital healthcare and online pharmacy platform based in Toronto has used growth capital to expand its virtual care and prescription delivery platform across a widening range of treatment areas, making healthcare more accessible to Canadians.
• A mental health services provider is using growth capital to expand access to quality, affordable therapy — scaling its clinician network and care platform to meet surging demand across the country.

Different industries, different strategies — but with the same underlying logic: ambitious founders who wanted capital and a capable partner, not a new boss.

The question worth asking

If your business generates more than $10 million in revenue, and you’ve been wondering whether there’s a way to diversify your personal wealth while bringing in new capital and opening the next chapter in your business’s growth, the answer could be minority equity, not a sale process.

Contact CBGF, a growth-minded organization that has helped more than 30 Canadian companies scale, today for a confidential, no-obligation discussion. We’re always happy to chat, even if it’s just to share more detail or offer candid perspective on your situation and goals.

The Canadian Business Growth Fund provides long-term, patient, minority capital to ambitious entrepreneurs leading established Canadian mid-market businesses.