Entrepreneurs’ best tips and some of the best practices for selling a company
Selling a company is a life-changing event for most founders, and there is little preparation. The best time to sell your startup, like raising money, is when you don’t need or want to. When there is a lack of traction, tough competition, or difficulty raising funds, many founders look to sell their startup as a backup plan. As a result, there will most likely be fewer bidders and less bargaining power for those who do come to the table. When you have options, it is the best time to sell your startup.
1.Leverage Your Network
It’s especially important for entrepreneurs to find someone who knows someone who can help them get their business off the ground. “I didn’t have much money, so I had to rely on people I knew to help sell this idea and push it forward,” Burks Solomon says. She also sought out new contacts at nearby Georgia Tech events and classes. “Through conversations with people I met there, I was introduced to experts who said, ‘This is actually right in line with what I’ve been studying and writing papers about for the last five or six years, but I have no idea what a real-world application might be.'”
2.Create a buzz by approaching investors in an indirect manner.
Burks Solomon was introduced to enough additional investors by one of her first angel investors that she was able to raise $1.5 million in six months. “I contacted a few people who knew her before speaking with her, hoping that they would approach her and ask, ‘Have you met Jewel?'” Have you ever met Jewel? ‘When I finally got a chance to speak with her, she said, ‘Everyone has been telling me about you!’
3.Be Resilient in Your Funding Search
“If you’re expecting to be between $10 and $200 million in revenue, there’s really no place for you to go for early-stage capital,” says Burks Solomon. Generally, venture capitalists seek multibillion-dollar exits, whereas banks require extensive financial history and collateral. So, many early-stage entrepreneurs can’t just walk into a bank and get a loan.” That funding gap, which is especially difficult for multicultural and women-led businesses, is why Burks Solomon founded Collab Capital.
4.Check that your company’s perception matches reality.
“We were evaluated early on as an enterprise SAS company, which we were,” Burks Solomon says. “However, we should have been classified as a deep technology company, so that we were evaluated based on the advanced algorithms we’d developed rather than how many companies we had contracts with.” As a result, I set a goal of changing our market positioning. One way I did this was by promoting Dr. Nashlie Sephus, who was the operation’s brains and worked on all of our algorithms, at tech conferences. People would be able to tell we were a company focused on cutting-edge technology.”
5.Establish Contact with Potential Buyers
“Don’t get so close that you’re giving them all your information,” says Burks Solomon, “but build a working relationship with enough of them that you’re only a phone call away from getting more deals on the table if you suddenly get an offer.” “You won’t have to scramble for counteroffers.”
6.As Well As With Other Entrepreneurs
Sometimes founders are so focused on attracting investors that they neglect to meet with advisors. Burks Solomon says it was a bad idea and something she wishes she’d known not to do. “Speak with someone who has been through it before.” In the few conversations I did have with people who had sold their businesses, I was able to pick up on some things that made me more aware of negotiation tactics that the buyer might use, which was beneficial.”
7.Know Your Non-Negotiables Before Meeting With Buyers
“Before going into any negotiation, write down three things that you will stand firm on and make it clear that you will walk away if those terms aren’t met,” says Burks Solomon, who adds that it’s important not only for a buyer to know where you stand but also for you to have a framework with which to evaluate potential offers.
8.Don’t Sell Too Quickly
Burks Solomon agrees with Carla Harris that “diverse entrepreneurs are likely to sell too soon simply because the alternatives are not appealing.” Too often, founders, particularly young, multicultural founders, jump at the first offer and negotiate too much away. According to Harris, “the fact that you’re having the conversation means you have leverage.”