Selling your company is not something that should be taken lightly. Before you sell your business you should think deeply about why you want to sell your company and how it will impact your life if you decide to do so. Whether you’re an innovative emerging tech company with Silicon Valley aspirations or a family run bakery, the process of selling your company should be the same.
Do not sell your company just because you want to get rid of it.
Doing your due diligence is vital and reluctance in not going through the process can be detrimental and can ultimately determine whether you get the right price for your company or not. Ideally, to be considered by a buyer your business should have gone through more than two business cycles.
The more business cycles your company goes through the more buyers will be able to see whether your business is profitable or not. If you are not sure when is the right time to sell your company the following situations should give you an indication of if you are ready to sell your company.
Reasons to sell your company:
You may want to sell your company due to personal matters that you may have encountered. Maybe you are of retirement age and you want to go on pension, you want to go and live that easy going life you always wanted somewhere warm and tropical. However, you may not be in the position to run your company, the way that you want it to be run. This may be a perfect time for you to sell your company so that your legacy can be continued.
In addition, you may be selling your company because of ill health and you recognize that you may not have the energy to run your business. Selling your company may relieve you of any stress that you are experiencing that comes along with running a business but at the same time your company will receive the right management in order to keep it moving forward.
Hence, finding the right person to buy your company is important to you because you want someone you can trust to run your company. You want someone who can take your company to new levels but at the same time someone who will respect the vision that you have in the company.
Instead of terminating your business due to personal circumstances selling it may be the best option.
Your Business has outgrown you
If your business has outgrown you, you may want to consider selling it.
Consequently, what initially started as a small business is now on its way to becoming a fortune 500 company and you feel completely out of your depth. You have tried everything to educate yourself on what to do but the truth is is that you need more expertise.
It is very common for small businesses that originally started as hobbies to develop into fully grown businesses. An example of a business like this can be seen when Martha Stewart Living created by Martha Stewart was sold for 353 million dollars in 2015 to Sequential brands. Martha Stewart started her company as a catering company in the 1970s.
Thus, as your business grows the more hands you will need on deck. You will need to onboard lawyers, accountants, and managers in fields that you may not have originally been educated in.
Furthermore, you may want to upscale your business but may not have the necessary knowledge to facilitate that growth within your company.
You may be faced with numerous issues that you don’t know how to tackle, and you may not be as well rounded to lead the company the way that you had previously done when it was in its beginning phases.
Maybe you are facing some financial problems and no longer want to be in financial difficulty.
A big financial difficulty for small businesses is getting funding.
Moreover, you may just want to be bought out from all the debt that you have incurred during the run of your business, however, you may still believe that your business idea is profitable and that there is a strong possibility of it succeeding in the future with the right financial provisions and leadership. You may consider selling your company if you find yourself in this situation.
It is not usually advisable for people to sell their businesses while they are in a financial slump. You should always sell your business when it is at a financial peak. This will help you gain more traction for your company from potential buyers. Additionally, it will show that your business is trending, is of important significance and is making a profit. Once you enter into a slump it will be harder for buyers to be interested in the company as nobody wants to end up with a company that is in tatters and has a lot of hidden legal and financial problems.
You may have even taken out a second mortgage in order to provide for your business needs and you are running behind on payments and it may seem like the only solution is to either sell your company and get back on track with the payments or have your home repossessed by the mortgagor. If you are unable to receive any other funding to relieve of your debt, selling your company be the best option.
Consequently, you may even have had to file for bankruptcy. Filing for bankruptcy should always be seen as the last resort as it will require you to sell your assets. When your assets are then sold if you have an unsecured debt the amount of money that your company was purchased for will be divided amongst your creditors.
Equally as important is the fact that there are a plethora of funding options out there if you have a good business idea and it is likely to gain profit in the future. There are a lot of different modes of funding rather than emptying your pockets, this may, of course, cost you a huge stake in your company but it will be worthwhile in order to get your company up and running.
Thus, if you do have personal debt and you want to sell your company in order to get rid of it, it is important that you sell your company while it is at its peak.
You want to move on to other opportunities
You may want to sell your company so that you can move on to other opportunities. You may be a true entrepreneur by nature and you love the innovative and creative side of doing business. However, the company that you started is now past the new and fresh stage, where you once had the freedom to create and explore. As your business increases you may have taken on more of a managerial or admin position. Thus, you may not be attuned to the mundane tasks that are required of you.
Selling your business may be the best option for you, as your primary ambition may be to start and then sell businesses. Selling your business may help you fund your next business and give you the capital to get it off the ground.
However, there are some things that you should consider before selling if you are an entrepreneur. As an entrepreneur presumably you are not a sole trader because the company is not considered to be your ‘life’s business’. Hence, you may have to discuss with partners, shareholders and other co-founders if you want to sell your share or if you want to keep a share in the company but leave the company. If this occurs you will have to employ someone to take over your role.
Overall, there a lot of options for selling your company if you wish to move on to other endeavors.
Mergers and Acquisition
Maybe you have the possibility of merging or being acquired.
This happens frequently in business. It’s one of the easiest ways for your company to grow, expand and enter a new market. The fact that your business is even on the platform that it can be merged or acquired means that it is already a huge a success and another company wants your company!
There have been many examples over the recent years of big incorporations buying other companies. The most known example is probably when Facebook bought Instagram in 2012 for $1 billion. Since Facebook bought Instagram it has been able to take it to new levels due to their popularity and consumer power. Now Instagram has almost caught up with Facebook’s popularity and over 700 million users are on Instagram.
In addition, Facebook has impacted Instagram significantly. Onboarding Facebook as buyers has enabled Instagram to grow at an exponential rate. Furthermore, the founders of Instagram are still involved in the running of Instagram and co-founder Kevin Systrom still maintains the role of CEO.
Another recent example of a company acquiring another is when the Chinese company Didi bought the Brazilian company 99 earlier this year. This was beneficial to both Didi and 99. Didi was able to enter a new market, and 99 was able to get more market power. In recent months Didi has been competing with Uber fiercely over the Chinese market, ending with Didi attempting to buy Uber out of the Chinese market but Uber would only do so for a 17.5% stake in Didi. Didi buying 99 will establish their dominance over the Latin market and may lead to further competition between them and Uber.
Hence, there are so many benefits to mergers and acquisitions. These benefits are mainly, more market power, new markets, new locations and more growth.
In conclusion, it is important to note that in all of these propositions it may still be possible for you to still be involved in the company you started. It depends on the terms that you set out when you want to sell it, this is known as the ‘exit strategy’. Consequently, maybe the buyer even wants you to stay as a manager, a CEO, or president or any other top-level position. All of the former terms need to be negotiated by a good lawyer with expertise in negotiating.