So, you have followed your passion to build your own company. Now you’re wondering what your exit strategy should be. This can be as risky a business as running the start-up itself. Here, seven skilled entrepreneurs who have amassed a net worth totaling over $2.4 billion share their advice and insights.
1. Sell To Make Your Business Grow
Is there ever really a “right time” to sell your business? Cindy Whitehead, an entrepreneur with a distinguished 22-year career in healthcare, has started and sold two businesses for more than $1.5 billion. Emphasizing the value of staying true to your life purpose, she states that “the right time to sell is when you believe the sale will make good on the mission you hold dear.”
Whitehead makes it clear that you should only consider a potential buyer “if someone other than you can take the company to the next level – through price competitiveness, distribution, and globalization. The heartbreaking part is letting go and hoping that the buyer does, in fact, grow your company, which is like your baby, to be all that it can be.”
2. Prepare in Advance
Joni Young, an entrepreneur, CEO coach, speaker, philanthropist, and founder of Joni Young Global, provides advice to those who want to make their businesses thrive. Joni says that “in general, you should prepare for your exit at least 24 to 36 months in advance. This is the minimum time frame needed to clean up the books and work with your legal and finance team to package the company. If you can present impressive financials supported by strong operations, you have an edge.”
Buyers look at past performance as a reference. But what is going on with the current economic state of your company will have the biggest impact on the ongoing business. Making sure you have a solid financial standing before beginning to shop your business can have a huge impact on how well your company sells.
3. Create an Expert Team
Shawn Thomas is a lifestyle entrepreneur focused on contributing to the world through mentoring, coaching, and philanthropy who sold his company for a multimillion-dollar profit. He understands that selling a business is no simple venture.
Thomas says, “To protect your interests when selling a company, it is highly advisable to form your own due diligence team comprised of legal, accounting, market research and ultimately, a valuation expert.” A great evaluation includes not only prospective data but also delves deeper into the past to assure yourself and the potential buyer that everything is in order.
“You want to know what the buyer knows and how they will be calculating the final valuation. This is a time consuming and oftentimes expensive process, but it could make a difference of millions of dollars,” Thomas explains.
Ryan Blair sold his company, ViSalus, for $792 million back in 2012, and then bought the company back in 2014 for $148 million. “You always want to sell potential. Buyers will attempt to discount your company’s value based on the ‘current state.’ Some buyers only look at the framework and foundation of a company and determine value on this basis alone. But great buyers have an expanded vision of what a company can become.”
Blair knows what it means to invest in a company you passionately believe in, and then see the work you put in not be improved upon. All the while, you know that with the right team, strategy, and effort, the company’s future could be an undeniable success.
“Facebook sold shares in their IPO at $100 billion based on their potential. Everyone thought that was a crazy price. I didn’t, nor did Zuckerberg and a few other believers. Now Facebook at $100 billion is cheap,” Blair said.
5. Focus on Providing Value
Quiane Crews is an entrepreneur and investor who sold his manufacturing company for over $100 million earlier this year. He is a prime example of a person who understands what it means to start with nothing and end up with everything – despite an uphill battle dealing with his family and their limited finances, and the decision to drop out of high school.
“A company proves its value not only through profits, but also by providing high-quality products, generating customer satisfaction, gaining efficiency with collaborations, and keeping with the right moral principles,” Crews said. “Focus on creating a great image for your company. This can massively influence the profits you attain when selling.”
6. Seek Advice
Ben Lee is an experienced entrepreneur who has previously bought out companies such as 99centbrains, a mobile applications designer and developer, and Rootstrap, a mobile app development agency. Lee suggests that entrepreneurs get advice when deciding to sell. “Go outside your comfort zone to get professional assessments. No other decision you make for your business is as fraught as this one, so you’d better get good people on your side telling you the blunt truth.”
Advice can help you better understand why a decision should or should not be made. It can also serve as a problem-solving method. It helps you make the right decision, while also getting the gears turning in your head about what can be improved or refined before selling.
7. Actively Look for Buyers
When the decision has been made and the time has arrived to finally sell your business, it is important not to wait for the buyers to find you. Diligently take the time to find the investors that you believe would be right for your company.
Elena Masolova is a master of selling successful companies. She co-founded and sold Darberrv to Groupon in a $50 Million deal, and also founded and led as CEO Pixonic, which sold to Mail.ru for $30 Million.
Masolova states that “with revenues more than $5M and strong margins, it makes sense to hire a boutique investment bank that has recently done deals in your space. They already know all the heads of M&A at your potential acquirers, and more importantly, they might know the current M&A strategy.”