How To Sell Your Company

The Startup Help Desk

We discuss questions on the minds of many companies these days: How do we sell the company? Whether you want to sell or need to sell, few people have experience doing it and even fewer have ever done it well. We address common questions about the selling process based on years of experience selling and buying companies including:

• When do you need to start planning a sale?
• How do you sell a company?
• How do you close a sale?

You can submit questions for us to answer on our website https://www.thestartuphelpdesk.com/ or on Twitter @thestartuphd - we'd love to hear from you!
Episode Notes
Reminder: this is not legal advice or investment advice.
Q1: When do you need to start planning a sale?
As the saying goes - companies are bought not sold. Thus, step 1 is to make sure your company has potential value for an acquirer.
We discussed two theories:
Theory 1: don’t think about and acquisition unless someone approaches you inbound OR it is your last resort. In either case, remember the probability of success is very low.

If someone approaches you:

• Ask them to put a number in an email
• This demonstrates they’re serious
• It usually scares off people kicking the tires and – unless they’re serous – they don’t give it a 2nd thought

If you have to sell: it usually takes at least 6 months and 1-2 people’s full time focus for a small chance of success at best.
Theory 2: the acquisition process starts MUCH earlier than you think. You need to increase your surface area for luck. Build great relationships with:

• Large customers
• Competitors
• Other major companies that could be acquirers

Acquisitions take time. Much like finding the right co-founder requires a lot of effort and relationship-building, acquisitions require rarely come together very quickly.
Q2: How do you sell a company?
There are three common phases that go into an acquisition:

1. Connect with executive leaders at potential acquirers
2. Have in-depth discussions where you pitch your business and make the case for the acquisition
3. Negotiation, after you have 1 or more LOIs and need to get to closing

To connect with potential acquirers, target 150-200 leaders, aiming for 50 first meetings.

• Dig through every network connection you have
• This volume requirement is why founders are attracted to bankers for help; however, bankers often focus on deals that are $200MM+

Try to get any offer at all:

• The first offer is often an acqui-hire - or a zero for the investors and only jobs for the team
• With this bad offer in hand, you can start to create scarcity and push for a decision amongst your other leads

Anticipate a lengthy legal process. This means:

• Understand the legal costs, which can be 6 figures, regardless of success
• And make a realistic plan for runway
• Don’t plan to close an acquisition with a few days of cash of hand - that will almost certainly result in disaster

Q3: How do you close a sale?
The faster you move towards close, the more likely it will close.

• Acquisitions are very challenging – assume that your sale won’t go through
• Deals can fall apart at the last minute
• Expect problems and give yourself room to maneuver
• Create urgency
• Continuously demonstrate that you solve a key problem or desire for the acquirer

Your potential acquirer wants to solve a key problem and become the better version of itself. If you keep reaching key milestones – and sharing these results with your potential acquirer – you can demonstrate how you help the acquirer become the future, better version of itself faster.