There is a common misconception surrounding startup businesses: selling means you’ve failed. To be fair, I’m pretty sure the only people still holding onto this misguided way of thinking are people who have never worked in the startup world. For anyone with a functional knowledge of how small business development, startups, and modern day business practices in general, mergers and acquisitions are a healthy part of the business life cycle. In fact, a great many entrepreneurs start up new companies for the single, intended purpose of making them attractive to sell to a bigger company at the right time. It’s actually a really exciting game that more and more people are opting to spend their careers playing. For a lot of small business owners, getting an offer to have their company absorbed by a bigger company or group is an immensely celebratory moment.
Even if your original plan when starting out wasn’t to eventually sell your company, any number of events and circumstances can bring you to a point where it becomes to most favorable way to move forward. And while leaving behind the startup phase of your business can be bittersweet, making sure you are as well-prepared and advantageously positioned when going into the acquisition can help make the whole experience as positive and lucrative as possible. We have a few tips for how to make that happen.
- Plan in advance
The best way to be in a position of power going into selling your company is to know ahead of time that that’s where you are headed and prepare accordingly. In general, knowing about a year in advance is adequate time. This means starting to develop relationships with higher ups at companies who you think might be viable buyers, and putting as much effort as possible into making your business strong. Booming businesses on the rise are what companies are looking to acquire, not flailing startups who are about to die out.
- The 20:6:3:1 Rule
When you’re actually ready to start fielding offers, this ratio is a great guide for the pitching process: call a big meeting with 20 companies who you believe would potentially be interesting in buying your business. Out of that, watch the ratio unfold – you’re likely to get around 6 follow-up meetings, from which you’ll probably see 3 more serious meetings, hopefully resulting in at least one firm offer. However the numbers work out, the point is the same: cast a wide net and the truly interested parties will rise to the top.
- Make wooing your life
Once you’re in the middle of negotiations with the most serious potential buyers, throw yourself completely into the process. Make them love you. Take them out to dinner, be their friend; wooing a buyer for your company is a lot like back when you were looking for a principle investor. These decisions often come down to a gut feeling on the part of the buyer – so now is the time to go above and beyond to make their gut feel very favorably about you as a smart, capable, likable person.
- Think ahead
The midst of taking meetings and negotiating offers with possible buyers is about more than crunching numbers – this is the time to show them the kind of innovative foresight and proactive business savvy you bring to a team. Quite often, having your business absorbed by a bigger company doesn’t mean that you will be doing a significantly different job, but it does mean that you will now be doing that job in a different context, to serve a different bottom line. Show potential buyers that you understand their company and have an energetic vision for how you and your company can work with and for their company. Their job as a company who acquires smaller companies is to have an eye for identifying who is going to benefit them the most – your job isn’t just to sit back and hope you appear to fit the bill; your job is to speak up and tell them exactly how you do.
- Don’t stop working on your business
Navigating all the meetings, research, and follow-up required in nurturing a successful sale of your company is obviously time consuming. Even still, don’t ever forget that you still have a business to run. Nothing will stop a sale in its tracks faster than a slowdown in your business’ productivity. During the sales process, your company itself becomes a product – if you don’t keep it in pristine working order, no one is going to end up taking it home.