2 min read At some point, every startup will need to exit the marketplace. Being prepared is key to doing this with success. In this article, we discuss how to plan for an exit and how to prepare for exit negotiations.
Here are some key steps to take in planning the exit for your company:
- Understand why you are exiting the business.
- Is this exit going to be seller motivated or buyer motivated?
- Explore the options. Consider who would be the best acquirer or which company would be best to merge with.
- Consider the market and industry. Is your industry consolidating? Is the market growing?
- Know what your company is worth. Research comparable valuations of similar companies. Revenue is typically a key factor along with profit.
- Start talking with potential acquirers and update them regularly on your progress.
- Ask other founders and CEOs for their exit experience. Find out what they discovered in going through an exit.
- Ask your current investors about their experience with exits to see what they know.
- Once you have a target acquirer, make a list of what they want to see in your company in order to buy it. This list becomes your strategic plan.
In negotiating the exit with an acquirer you’ll need to know the following:
- Key metrics about your business, both those that show the company in a positive light as well as a negative one.
- The total addressable market for your company.
- The top three opportunities your company can attack.
- The company’s competition and competitive advantage.
- The company’s track record in meeting forecasts and accomplishing milestones.
- Why are you selling the company, and why now?
- Why is the acquiring company a good fit for your company?
- How closely aligned in operations is the company to the acquiring company’s operations?
- How much integration work will need to be done?
- What role will the CEO play after the acquisition?
Think through the answers to these questions as most of them will come up.
At every fundraise stage the CEO can choose to raise funding or sell the business. If you choose to sell your business, how can you go about doing so?
Meet all the C-level people at companies that could acquire you, and the CEOs of companies who are potential acquirers. Gain an introduction and then generate an ongoing dialog with the CEO. In the process of doing so, you can determine their interest in your type of business. If they like what you do and can see how it fits into their business, then you have an opportunity to pursue being acquired.
As always in business it is about starting and building relationships.
Hall T. Martin is the founder and CEO of the TEN Capital Network. TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: firstname.lastname@example.org