In the startup world, there are more failures than successes. What is a success?
It could be an Initial Public Offering. That means listing equity on a stock exchange. This is a long drawn-out process and complex. It’s expensive and only a very few businesses are truly eligible for this type of liquidity event.
Selling your company (being acquired) is the most common exit. This includes both tech startups and non-tech companies.
And this should be mentioned: Just keeping going is always an option. But sometimes personal circumstances of the owners don’t make this an attractive option. Statistically, most companies do not do not have the first two options above.
The choice and opportunity depend on the circumstances.
But let’s assume the best decision is to sell the company. Here are some things you can do to prepare and make it more likely to happen.
First, determine if a ‘deal’ is logical. This means identifying all of the pluses and minuses.
Don’t just list the pluses and minuses for the shareholders. Consider all stakeholders which includes management, employees, vendors, and customers.
Consider the details. And think about it for a while. Consider how various factors are interrelated.
Look at these additional areas in detail:
⇒ Your competitive situation, how you compare to the competition. And use financial analysis for this. Compare financial ratios, market share, brand strength, intellectual property, and products (both now and planned). Know where you are strong and where you are vulnerable.
⇒ Accounting. Make sure your financial statements are accurate. Even a small error can distort results and destroy your credibility with a buyer. Understand your accounting.
⇒ Financial Forecasting. Run your business by the numbers. Once an Exit option arises, you will have a good starting point to consider the option. Be willing to put the work and investment into making good forecasts. Discuss them with your top management. Doing this will allow you to understand the strengths and weaknesses of the business in a qualitative way. Basically, quantitative forecasting allows you to understand the business in a non-numeric way.
Most importantly know why you are making the decision to exit the business.
