4 steps to successfully sell your startup

The Blackroom Team
The Blackroom Team

There are several motivations for which entrepreneurs found new businesses. The thrill of transforming creative concepts into practical applications and successful businesses is at the top of the list of motivating factors. Eventually, the founders of a successful startup have the option of exiting the company in one of three ways: through an acquisition; through an initial public offering (IPO); or by stepping down to allow others to lead and run the business.

The vast majority of startups end their existence through a merger or purchase. It takes a successful company anywhere from six to ten years, on average, to reach a liquidity event, depending on the business strategy and the industry in which it operates. The truth is that for every acquisition that is reported in the media, countless others take place covertly through private equity firms and brokers.

It is never too early to start laying the groundwork for an acquisition, which should be one of your primary priorities if you intend to eventually sell your firm. The following is what you are need to perform.

1. Identify Competitors Who May Become Customers

It is highly likely that any future acquirers will be either your direct or indirect competitors. Learning about the market and the many companies already operating in it is one of the first things you should do when launching a new business, regardless of whether or not you have a specific acquisition strategy in mind. Researching the short-term and long-term plans, prior investments, and acquisitions, as well as the present issues, of your competitors is another way to find out what would interest them.

In addition to conducting research online, which may not provide all of the answers, conducting interviews with the founders or leaders of the respective companies is the quickest approach to obtain the information you require. If you are a competitor, those decision makers might not be eager to discuss the details with you, but if you are still relatively unknown, many of them will agree to an interview with you.

To put it another way, the most advantageous moment to carry out this research is before to the launch. As was noted before, doing competition and market evaluations early on in the life of any firm is extremely important. You can better prepare for the problems that lie ahead by having conversations with other entrepreneurs in the industry who have more expertise. It is to your advantage to have knowledge of the purchases that are of interest to your competitors.

2. Identify A Distinctive Competitive Advantage

There are numerous approaches to setting a company apart from its competitors; however, not all of these approaches are defendable. The research that you did in the first stage will assist you in locating prospects that are worth pursuing. These meetings have the potential to serve as the first practical validation test for your proposal. It's possible that you'll notice rather quickly that the purchasers and other rivals aren't particularly interested in the solution you were planning to invest in.

It's not necessary to have a patented product in order to have a unique competitive edge. It might be an exclusive relationship with a significant distributor or supplier. It's possible that you're leading the pack in a market that your rivals are intending to join, which would make purchasing you a more efficient means for them to take over that market. It's possible that this is the answer to an issue within the company that's been costing them a lot of money and effort.

Any inquiries you may have regarding private equity companies' objectives, expectations, previous purchases, market trends, potential purchasers, and so on can always be directed toward them, and they will gladly answer them. As a result of the fact that they generate money by facilitating merger and acquisition deals, they have a financial incentive to advise potential sellers on how they might improve their prospects of successfully selling their businesses and so earn more money.

3. Define Your Acquisition Metrics

To put it another way, what aspects of your company will attract potential buyers, and what aspects of it will make you eager to part with it? If you don't begin with a target, you won't know when you've reached a significant milestone. This is true despite the fact that the number may shift over time as you learn about new opportunities and prioritize other things.

Having the goal of eventually selling a startup as your primary incentive for launching a business is not a good idea. It may take several years before a company reaches the point where it can be acquired. You won't survive long enough to witness an acquisition if you don't have curiosity and passion for the journey. This in no way diminishes the need of having a strategic acquisition plan. You need to have a crystal clear understanding of comparable exits, as well as their important indicators, such as sales and growth rate, competitive edge, and so on.

4. Establish Connections With Possible Acquirers

After forming successful partnerships with acquirers as clients, suppliers, or distributors, a significant number of startups eventually end up being bought by larger companies. Choose the best way for you to collaborate with the specific list of purchasers that you compiled in the first step above. You owe it to yourself to develop an early connection with those who make decisions and work to cultivate a relationship with them.

5. Utilize Acquisition Marketplaces

No matter its size or scope, a profitable and expanding company will always find a buyer. Even if it can take some time, ultimately there will be someone who is interested in taking over. There are a variety of marketplaces available today that, depending on the nature and scale of your company, can help you find a buyer at a reasonable price. You may begin by looking at websites like Flippa and Empire Flippers.

Last but not least, keep in mind that timing is one of the most critical factors that might affect how likely it is that you will successfully complete an exit strategy. You don't want to be either too early or too late, but you do want to be just the right amount of both. You want to be early enough to have room to swiftly acquire market share, and you want to be late enough for the market to adopt the business model as a viable and useful innovation.

This is simpler to say than it is to achieve, but it can establish a time frame by which the market can be evaluated. Building something that others want and need is a success in and of itself, regardless of the circumstances under which it was accomplished. Take the procedures listed above to get ready for an exit someday, but your primary focus should be on building a great business right now.

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