So, after a long labour of love, you’ve decided it might be time to sell your startup. Firstly, congratulations. You’ve built a valuable business that you believe can be acquired, which is an achievement in itself. But, while it might feel like the end is in sight, it’s worth keeping the champagne in the fridge for a little while.
As a founder, you’re probably familiar with sleepless nights and a gruelling schedule, but with the traditional merger and acquisition (M&A) process, the transition period is often where the real work begins. This is because preparing your company for exit and all the accordant efforts it entails is a full-time job.
The process is notoriously nebulous and scrupulous and usually takes at least six months but can take longer. You’ll need to get familiar with M&A lingo during the diligence process including the library of documents that will need to be exchanged, negotiated and agreed upon before signing a deal. When you add that to your continuing responsibility to support your team and customers to grow your startup, things can become overwhelming.
At Foundy, we’ve are continually refining our platform to take the stress and time out of the M&A process. To help you navigate a merger and acquisition deal, find potential buyers and get the best deal, we’ve put together the essential things you need to do to sell your startup.
1. Choose the right time to sell
There are several reasons why founders decide to pursue an exit, and various factors can contribute to those reasons. It is best to be realistic about where your business is. Do you feel compelled to sell the company due to personal reasons wanting to leave whilst the company is doing well or perhaps the business is limited on cash but still has an opportunity to grow with more resources? Or if being honest with yourself perhaps you are in a position to spend more time (e.g. 1 to 2 more years) and resources focussing on continued growth and selling when the company is at a higher valuation? Selling your startup while it’s thriving — demonstrating consistent growth and scalability — puts you in a strong position to get a fantastic deal and hold most of the cards during negotiations.
Other reasons for selling a startup pertain to the founder and the existing team. Perhaps you and your team just aren’t positioned to maximise your company’s potential. Selling to a larger acquirer with additional skills and experience might dramatically expand your company’s horizons and set it up for long-term, sustained success. Alternatively, if you’ve been working on your startup for years and are burned out or feel it’s time to pursue other goals then these personal circumstances may no longer allow you to devote as much time and attention to your business as it needs or you’d like to give.
Whatever your reason for selling, you need to do everything to strategically position your startup in an attractive manner infront of the buyer and investor communit. Foundy can help you get acquisition ready, whether you are seeking a partial or 100% acquisition, before placing you infront of our rapidly growing buyer network.
2. Learn where to sell your startup
It’s one thing to decide to sell your business; it’s another to get the ball rolling. If this is your first experience taking a company to exit, you might be at a loss where to start.
To sell your startup, you need to understand where to find buyers, advisors and educational resources in order to most effectively navigate your way through the complex process in order to secure the best deal possible.
First, you can contact venture capitalists and other investors who specialise in buying or investing in startups. To do this, you’ll first need to make a list of candidates with the potential to buy your startup. Making this list can be a lengthy process as you’ll need to look into their previous acquisitions and assess several factors, including:
- Your position in relation to their previous business acquisitions
- Their industry and sector specialities
- Their financial ability to complete the deal.
An easier way to contact investors and venture capitalists is to work with a broker. Brokers specialise in business sales and will act as an intermediary between you and prospective buyers. Brokers have an in-depth knowledge of the investor community and will be able to advise you on your best options. But it’s worth noting that brokers will take a large percentage of the sale – sometimes as much as 10% on smaller tickets.
One of the most convenient and fastest ways to sell your startup is to list your business on an online marketplace like Foundy. Startup marketplaces allow you to list your business and get it in front of buyers without doing most of the legwork. Once your listing is live, entrepreneurs will be able to contact you directly with offers. Alongside that, Foundy provides sellers with M&A and legal advisors, so you can be sure that everything is above board before going ahead with a deal.
3. Find out what potential buyers are looking for
Speaking of prospective buyers, it’s crucial you understand what they’re looking for before you start any acquisition talks. Unless you’re a serial entrepreneur, this will likely be your first time negotiating an acquisition deal, so you need to be prepared.
Even if your business is booming, investors and acquirers have their pick of the bunch. While you only have one company to sell, they have hundreds they could buy or invest in, so you need to make your business stand out from the competition. If you have a good understanding of what prospective buyers want, you’ll be in the enviable position of being able to leverage a better offer to get the best deal possible.
Here’s what you’ll need to organise to get that dream deal:
- Evidence of increasing or steady profits
- Consistent and reliable financial records
- Proof of customer base
- A professional business valuation
- Organised documents, contracts and paperwork.
But alongside the technical and financial side of the sale, potential buyers will be influenced by the appearance of your business. First impressions count, so ensure that your business looks outstanding from the outside. If your business is only online, you can do this by:
- Ensuring your website is outstanding
- Making sure all social media channels are consistent and professional
- Monitoring any review platforms.
Due to the vast amount of choice that buyers and investors have, you need to do everything in your power to make your startup stand out. Spending time and money before selling your business might seem counterproductive, but ensuring you tick off items on an investor’s wishlist will give you a better chance of selling your startup and getting the best deal.
4. Qualify your potential buyers
Getting an offer for your business is incredibly exciting, and it can be tempting to jump at the first one. But it’s not enough just to find any buyer — you need to identify potential buyers who are a good fit for your company. Otherwise, you may waste time and resources pursuing deals that go nowhere. So, how can you qualify your startup’s potential buyers?
First, consider the type of buyer that would be most suitable for your product, service or customers. For example, does the buyer have experience in your industry? Once you’ve determined the type of buyer you’re targeting, you can narrow down your list of potential buyers.
Next, look at the size of the potential buyer. Are they a large company with deep pockets or a smaller operation tight on cash? Again, this will help you focus your efforts on buyers who are more likely to make a purchase.
Finally, you’ll need to take deep dive into the company’s acquisition history. If the company has previously acquired other businesses, get as much information as you can on the deal and purchase price and look at how the business is performing now. Your startup is your baby, and you want to know that it will continue to be a success following investment or a sale.
By qualifying potential buyers, you can save yourself a lot of time, money and stress.
5. Prepare for post-acquisition
As you can see, there’s a lot to do to ensure your business sale is successful. And that’s on top of continuing to run your startup. But while there’s a lot to do, one of the most exciting elements of the process is preparing for life once the deal closes.
If you’ve been working to build your business for years before going through the stress of an acquisition, it can be incredibly relieving once the process is over. But it can also be daunting. While your bank account might be flush, you need to decide what to do next. Luckily, you’ve got plenty of options. Here are just a few things you can do after selling your business:
- Start a new company
- Invest in other companies
- Take a long, well-deserved holiday.
Whatever you decide to do, take your time and find something you’re passionate about. Tick off a few bucket-list items in the meantime and revel in your success.
If you’re looking for some inspiration, read our expert guide to post-acquisition life.
Streamline your startup sale with Foundy
If you’re considering selling your startup or looking for investors, Foundy can help. Our platform is one of Europe’s first digital marketplaces for startups. After some pretty lengthy and needlessly-complicated personal acquisition experiences, the Foundy team came together to change how mergers and acquisitions work for good.
By joining our growing community of buyers and sellers, you can get your business in front of vetted potential buyers in less than an hour and complete the sale of your business in as little as a month.
Sign up for your free seller account today to create your anonymous business listing and start receiving offers straightaway. It’s easy, fast and stress-free. Foundy empowers founders with the freedom to fly. Prepare for take-off.