What Buyers Look for in a Lower Middle Market Business

You’ve built your company from the ground up. Maybe you started with a few employees and a solid service model, or maybe you grew out of a niche product that caught the right attention at the right time. Now, your business is generating steady revenue, your systems are in place, and you’re starting to ask a big question: Is it time to sell?

Selling a business is a major milestone, and in the Dallas lower middle market, the opportunities are real. But so is the competition. With more buyers entering the market: private equity groups, strategic acquirers, and first-time operators, how do you make sure your business stands out?

At Kratos Capital, we help business owners across Dallas prepare for that next step. Whether you’re just beginning to explore your options or actively seeking a buyer, knowing what buyers want can shape your strategy, strengthen your position, and lead to a more successful outcome.

What Do Buyers Look for in the Lower Middle Market?

Buyers in this segment are looking for a strong foundation they can build on. They want companies with:

• Consistent, recurring revenue
• Clear profitability and healthy margins
• Strong operational processes
• A loyal, diversified customer base
• A defined niche or competitive edge in the market

They also want to know that risk is under control. That means up-to-date financials, minimal legal concerns, and a leadership team that can support the transition.

If your business checks these boxes—or can be shaped to do so—you’ll have a better chance of attracting serious interest and commanding a strong valuation.

How to Make Your Business More Attractive to Buyers

Here are a few ways to strengthen your position before entering the market:

Get your finances in order - Buyers want reliable, accurate records. Invest in clean books, consistent reporting, and professional financial review. Transparency builds trust.

Highlight your growth potential - Whether it’s a new market, a scalable model, or an underutilized asset, buyers are drawn to businesses with room to grow.

Streamline operations - Tighten up your systems. From inventory and fulfillment to customer service, a well-run business is more appealing and easier to transition.

Reduce reliance on key individuals - If your company depends entirely on you, that’s a risk. Buyers want to see strong middle management and documented processes.

Prepare your story - What makes your company valuable? What problems do you solve, and why are customers loyal? We help you refine and present this story in a way that resonates with buyers.

Why Dallas Buyers Are Looking Now

Dallas is home to one of the most active and diverse M&A markets in the country. From logistics and healthcare to tech and professional services, buyers are looking for lower middle market businesses with strong local roots and scalable operations. If your business has performed well in recent years, now may be an ideal time to explore your options.

Plan Ahead for a Smoother Sale

The earlier you start preparing, the more control you’ll have when it’s time to go to market. Even if you’re a year or two away from selling, a strategic review now can identify small changes that lead to significant value down the line.

Partner with Kratos Capital

At Kratos Capital, we understand what it takes to position a lower middle market business for success. We work directly with Dallas-based business owners to prepare for exit, connect with serious buyers, and negotiate deals that reflect the value you’ve built.

‍Contact us today to schedule a confidential consultation. Let’s talk about where your business stands and what’s possible in the next chapter.