A massive supply of privately held businesses is heading toward the market. Private equity firms are already sitting on a backlog of roughly 33,000 portfolio companies representing $3.8 trillion in value, while approximately 1.4 million privately held businesses representing another $9 trillion are expected to come to market in the years ahead. But there's a problem few owners are talking about:

There may not be enough qualified buyers or enough capital to purchase a lot of these businesses.

Being for Sale Will Not Be Enough

When supply increases faster than demand, buyers gain leverage. They can become more selective about which businesses deserve their time, capital, and premium valuations. That could increasingly divide businesses into two groups. Class A companies will attract multiple interested buyers, stronger valuations, better terms, and greater transaction certainty. Everyone else will probably be stuck with valuation discounts, unfavorable deal structures, extended sale processes, or no transaction at all.

This means owners planning to sell in the next 3–7 years shouldn't simply be preparing their businesses for sale. They should be working now to build businesses buyers will compete to own.

What Makes a Class A Company?

The characteristics of a Class A company are not mysterious.

Buyers generally value businesses with:

  • Consistent growth and profitability

  • Predictable and recurring revenue

  • Strong cash flow

  • Low customer concentration

  • Limited owner dependence

  • Capable leadership

  • Documented and scalable systems

  • Sustainable competitive advantages

  • Strong strategic and operating assets

  • A credible path for continued growth after the transaction

The challenge is not knowing what these things are.

The challenge is systematically building them.

That's Why We Built STAR

STAR is a proprietary, AI-enabled business value creation system designed to help companies systematically become Class A businesses. It connects strategy, capabilities, constraints, organizational change, strategic and operating assets, value drivers, and enterprise value into one continuous improvement system. Instead of waiting until the company goes to market to discover what buyers don't like, STAR asks the question years earlier:

What should we improve next to build a stronger, more transferable, and more valuable company?

That creates time to actually do something about the answer.

The Best Exit Strategy May Not Be an Exit Strategy

Owners often begin preparing for a transaction too late. Three months before going to market is enough time to prepare a presentation. It is not enough time to fundamentally change the quality of a business. Three to seven years is different. That is enough time to reduce owner dependence, strengthen management, improve recurring revenue, diversify customers, build competitive advantages, improve margins, institutionalize processes, and create a stronger growth engine.

And something interesting happens along the way:

The same characteristics that make a company more attractive to buyers generally make it a better company to own. So even if the owner decides not to sell, the work has not been wasted. They own a stronger, more profitable, more resilient, and more valuable business.

The Market May Soon Make the Decision for Us

The coming wave of businesses seeking liquidity could fundamentally change the balance between buyers and sellers. Owners should not assume that simply building a successful company guarantees a successful exit. In a crowded market, quality will matter more.

The goal is to build a Class A company.

The time to build a Class A company is not when you're ready to sell.

It's years before the buyer ever arrives.