What All Entrepreneurs Should Consider Before Selling Their Company

It is a tough decision and one that even if you felt that you made the right choice, you will always be second guessing.
What All Entrepreneurs Should Consider Before Selling Their Company
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In recent years, signs of increased M&A activity have led many to believe that 2017 will be another groundbreaking year. In the past few months alone, companies like Walmart, Intel and Cisco have made $1 billion-plus acquisitions of tech companies with the potential of many more on the horizon.

Most believe passion is critical to being a successful entrepreneur. And while there is no doubt that this is true, I’ve discovered you must combine passion with resilience and, above all, listening to your gut -- especially when you are building your company and eventually approached with offers to sell.

Related: Avoid These Financing Mistakes That Kill Business Valuations

At Klashwerks, I’m fortunate to be able to combine my passion for building a company along with my passion for the car industry. With experience starting two companies and undergoing four successful exits, I can attest that the journey from startup to acquisition is an incredible ride, but one that also requires a high level of flexibility.

Here are some valuable lessons I’ve learned when developing new companies, best practices when it comes to selling your company or getting acquired and my personal take on how to determine your next endeavor.

Getting started: Finding your vision and managing your ego

Diving into a new project is easy. It’s learning how to be a manager and actually executing upon your idea that’s hard. To get started, ask yourself if you are following these three tips for startup success:

Start with vision. Examine the market opportunities first as opposed to just focusing on what you feel passionate about. If those two align, then you’ve hit a jackpot!

Evaluate market opportunity. When evaluating what markets are ripe for disruption, it’s important to ask yourself, “What niche can I leverage?” Identifying your market opportunity is a disciplined but necessary process; sometimes it may arrive as an a-ha moment, other times it may take more work. I’m experiencing that now with Klashwerks. I’ve found that my passion and skills are more about building a high-tech and product-focused business and with the help of the right team and clear goals, I’ll be able to turn this vision into a reality.

Related: Know When and How to Sell Your Business

Manage your ego. Egos can have a negative impact on business, and at the end of the day, it’s not about you, it’s about the success of the company and your team. Staying grounded as a leader allows you to respond much more effectively to both opportunities and challenges. By not letting your ego cloud your judgement, you are given more space to refine and follow your intuition.

Remember that you don’t need to be the smartest person in the room. Often companies are most successful when the CEO allows other people to take center stage when required. As a CEO, you’re also a team member and it’s important to always remember that.

Becoming an attractive player in the market -- and approaching acquisition offers

As you build your product and start to gain traction with media and customers, other businesses will start to notice. If you’ve done all the right things so far, people will start to approach you for discussions. When you are noticed, you need to contemplate that tough decision along with your partners on whether you should continue on and take this company to the next level or entertain discussions with potential investment partners/buyers.

Related: Planning to Sell Your Company in a Few Years? You Have Work to Do Now.

With my last startup, Blacksumac, we were approached by other companies for discussions and I felt we had reached a crossroad. It was clear that we needed to raise significantly more capital to take the company forward. It is a tough decision and one that even if you felt that you made the right choice, you will always be second guessing. In scenarios like this, you must remind yourself that your ego should be pushed to one side and that decisions have to be made for the success of the business and the realities of the market.

If you decide to be acquired, decide what your role will be and be prepared to negotiate hard. Don’t allow yourself to get trapped in a job you hate. These days, the time between startup and acquisition interest can be rapid. For Blacksumac, the whole process was just 19 months from start to finish.

Selling my company: Now what?

It’s always hard to know whether you sold at the right time or if you should have continued on. And, of course, there can be a loss of control if you decide to stay on with the new company post-acquisition. You go from everyone being a direct report to a much larger matrix organization that can be very slow-moving in comparison to a startup.

Related: 5 Mistakes to Avoid During Exit Planning

This is a good time to remind you that you need to negotiate a role that’s going to work for you in the acquiring company. Many startup CEOs have made the mistake of not doing this well. Many things can be learned being part of a larger organization, so use this time to learn the valuable experience that will help your next startup.

When it comes to starting your own company, the best advice I can give is to identify a clear vision, not let your ego get in the way and practice resilience as your company goes through its ups and downs. Your business plan will help dictate how you operate your company, but don’t forget that curveballs will happen along the way. Take it all in and surround yourself with team members who are just as excited for the journey as you are. Entrepreneurship is a long path to go down, but I’ve enjoyed every second of it and look forward to what this next chapter brings.

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