Selling your business - part 2.
There are hundreds of articles out there explaining how the M&A process works when you come to sell your business.
I have two problems with them.
They're too late. There are lots of things you need to prepare well in advance of actually starting the M&A process.
They're boring. If you're a founder about to embark on the process, you don't care about the mechanics, you just want to know how its going to impact you.
That's what FounderON is here for. Answering the question of how will it feel, rather than just how will it work.
In this blog we're going to focus on point 1 above. And later in the series we'll delve into the actual acquisition process.
But first, we have some work to do.
We need to get your business as valuable as possible, long before you settle on a deal.
In part 1 (see here) we focussed on ways that you can influence the multiple that your business will be valued on.
Now that you're working on that, we need to start the groundwork for finding your future buyer. And if you're 3 or 4 years away from wanting to sell your business, then you're just in time!
You're going to get the best deal for your business if it's bought, not sold.
It's possible to 'go to market', like you would when you're selling your house. But at that stage you're reliant on buyers being in the market at that moment in time. And once you get some offers you pick the best one.
What you want instead is to be fully focussed on growing your business, and an offer come when you're not expecting it. At this stage you don't want or need to sell, so you'll be in the best possible position to negotiate. And if they don't match your requested value or terms, then who cares, just keep growing your business.
I'm guessing that most people reading this have some kind of content marketing strategy in their business. Connecting with relevant potential clients or customers, and sharing content about the value that your product or service can bring to them. Pretty basic and well used strategy to drive inbound new business.
If you're not doing this for your business, you probably should be. Drop me a message on Linkedin to learn how!
If you are doing it to sell your product or service, then why wouldn't you do the same thing to sell the most valuable product you're ever likely to sell. Your business.
The slight difference. It's likely to be a slightly longer sell. Which is why you should start this process as soon as you start your business.
In part 1 we spent time really thinking about who might find value in buying your business one day. Now it's time to make contact. But we're going to do it subtly. At first anyway!
Time for my proprietary Connect/Share/Ego/Ask strategy...
Steph had to type her name, address and occupation 52 times on the final contract before we could celebrate!
Time to hit those Linkedin connections. Remember to limit to 100 per week! Start connecting to CEO, Corporate Development, M&A, Investor level people at the companies that you think may be interested in your company one day. Likely you will get about 25-30% acceptance rate, which is why it's good to connect to multiple people from the same businesses.
Do this over the course of a month and you could have 100+ potential buyers in your network.
Really your content strategy on Linkedin doesn't have to differ too much from the content that you're using to attract clients. But make sure you throw in some brags, awards, client wins, and even some provocative opinions on the future of the industry.
They'll never like a post, or comment. But they'll see it.
Continue this for months or even years. Painstaking, but essential.
Now it's time to make contact. In the form of a little ego fluff.
I'd suggest you start with the CEO's and just send a one or two sentence note saying that you're experiencing mega growth and would love guidance from an industry legend etc etc. You see what I mean by ego fluff.
Would they be willing to do paid mentorship or similar?
Probably they won't, or maybe they'll agree to have a call or a coffee. Really it doesn't matter how they respond. The important thing is you're on their radar. And they know you're growing fast!
Now the final stage, and this could be at the same time as the infamous ego fluff, or potentially a bit closer to a desired exit. Make contact with the corporate development or M&A people within these businesses and ask if they'd be able to spare 15 minutes to answer some questions.
You can tell them that the world of M&A is like the wild west to you, but you're running a fast growing business and you're getting approached by people trying to buy you week in week out. You'd love to get their advice on how valuations work etc.
It's these guys job to buy companies. They're not doing you a favour if they buy you, it's how they make their money. So they're great people to connect with, learn from and let know that you're hot property.
If they agree to a call, ask them how they work out valuations, what types of clients do they prefer, what would negatively impact valuations etc. Anything you want to know really.
Now your job is to just keep running your business and keep sharing the wins. Eventually you'll likely get requests for 'coffees'. Informal enquiries about potential acquisitions. I'd suggest taking all the coffees and using it to ask them more questions than they ask you. Why are we interesting to you? If we grow some more will you be interested in a higher valuation? How would an earn out be structured?
I had 13 approaches to buy my agency, and all of them were from businesses I had connected to years in advance.