4 things founders & management teams need to consider before selling a company


Preparing for the sale of a company can be a long-term process and one that can zap the energy of even the most energetic CEO.

We've put together a shortlist of four things founders/management teams need to consider before selling a company.

#1: Keep moving forward

As you enter the sales phase, you might be tempted to scale back your day-to-day operations. This isn't a good idea.

You want to keep your business running as usual, just as if a sale isn't right around the corner. This guarantees you a strong negotiating position throughout the sale.

Whether you are raising funding or completely selling your business, you want to ensure that your company continues to run well and profitably.

Consider it a parallel track. On the one hand, you're getting ready to sell and divest yourself of your business, while on the other hand you are continuing to work and grow your business.

Why is this important? If the purchasing party is under the impression they're buying a well-run business that's growing, but it all the sudden takes a nose dive because it isn't operating as strongly as it was before, your sale might fall through.

In addition, you want to keep running your company profitably just in case your sale does falls through.

If you neglect your operations, revenues drop, and the sale falls through, you'll have a hard time finding another buyer or negotiating the same sale price.

#2: Do your due diligence

You know that your prospective buyer has checked you and your company out thoroughly, but have you done your due diligence on your prospective buyer?

Have you uncovered whether or not they really have financial backing? Are they an entity you want to sell your beloved startup to? Will they treat your staff and customers in the way you would?

Just make sure you are really comfortable selling your company to the buyer. 

#3: Get to know your investment banker

You've built a solid company, and it's time to sell. Now what?

Look toward your investment banker. Give this person all the information they need to put together a tantalizing story to sell your company.

Let your banker look for buyers, research them and begin the negotiations. Your banker can conduct all the due diligence and move the sale along.

Do be involved, but resist the urge to take control. Leave the sale in the hands of your investment banker, and keep running your business to ensure a successful sale. 

#4: Know when to tell your team

Should you tell your employees right away when you start to consider selling a company? It really depends on the exact structure of your company, but probably not.

While you might tell your chief financial officer and other chosen management team members, you don't want to break it to your entire team until the papers are signed.

Telling your staff too soon causes rumors and feelings of uncertainty. It can also lead to a mass exodus of your staff as they start looking for other positions.

Ensure that the leadership team you do tell understands the need to keep the sale under wraps.

Once it's time to tell your staff, you want to have a written plan for them, so they know what their future will look like. 

Final thoughts

Now that you are aware of these four things to consider before selling a company, we leave you with one last thought:

Be patient.

For many startups, the first potential buyer isn't the actual buyer. It may take several starts and stops before you find just the right buyer.

Don't get disappointed if the initial sale doesn't go through. Stay strong and negotiate the next deal. While the first buyer didn't work out, your second buyer may be financially stable and willing to make you an even better deal.

Are you a new startup ready to succeed? Are you looking to get your new business off the ground and watch it rise to success? We are here for you. We can help answer your questions and guide you through the process. Outsource your HR duties, finances, payroll and more to us. Contact Escalon today to get started.

Image: Nastuh Abootalebi on Unsplash 

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