"What's your plan for selling this business? What's your exit plan?"
Ah, the popular refrain from investors, employees, advisors and just about anyone else that's banking on our stock to make them a few dollars. We all know that there's a possibility of selling our company, but how much planning can we really do to make that happen?
While it's possible to consider specific acquisition targets, that's really only a small part of the plan.
The real plan simply maps back to the execution of our idea. Knowing that we might be a good fit for a big company is great, but unless our product has incredible value (that came through execution) then "preparing to sell" doesn't mean much.
Selling is really only an imperative if investors are involved, and that's only if they require a single cash out event.
VCs will require a single cash-out event, whereas some angel investors may be willing to do some profit sharing instead. If there are no investors involved, and no employees are waiting on their stock options to convert, then it's just business as usual.
It's a bit more hopeful than people give it credit for.
The reality is that we can only have so much influence over what a potential buyer may do. Acquisitions are incredibly complicated transactions that have a lot to do with timing, the personalities of stakeholders, and the ability to agree on a deal.
What can I actually plan for?
We can plan for an acquisition by building relationships with potential acquiring companies early in the process.
This often takes on the form of a partnership that establishes the value, and in particular something that the buyer will want more of. Acquisitions are often done through relationships, so if a startup wants to be acquired, the Founder must aggressively pursue those relationships.
Why Having an Exit Strategy Doesn’t Mean I Want to Sell My Business. Jason Eckenroth, Co-Founder of Sovereignty, discusses the alternatives to selling your business.
$250K is a Life-Changing Exit (podcast). Wil and Ryan discuss how a $250K lump sum check can have more of a life-changing impact than a massive exit.
Your First Order of Business? Plan a Startup Exit Strategy! Steve Little, CEO of Zero Limits Ventures with six startup acquisitions averaging $100M each to his name, digs into what it takes to create a well-thought-out exit strategy.
Wil Schroter is the Founder + CEO @ Startups.com, a startup platform that includes Bizplan, Clarity, Fundable, Launchrock, and Zirtual. He started his first company at age 19 which grew to over $700 million in billings within 5 years (despite his involvement). After that he launched 8 more companies, the last 3 venture backed, to refine his learning of what not to do. He's a seasoned expert at starting companies and a total amateur at everything else.