Preparing to sell

It can be difficult to decide it’s time to sell your startup.

For me, the signs had been there for some time—I was just avoiding them. Toward the end of 2019, I was reviewing the business with my team. We were faced with the reality we had missed most of our revenue targets and were far off our growth plan. We did have some loyal customers, but rarely received feedback that our product was a “must-have.” We had never found an acquisition lever we could pull repeatedly, and this meant we were just okay at a few acquisition channels, but not great at any one. Most importantly, though, we were emotionally and financially exhausted. Truthfully, we had fallen out of love with our business. 

Let me be clear: knowing you want to sell your business isn’t the same as giving up. Giving up can be easy. Giving up can be shutting down. Trying to sell your business is hard and requires confidence you’re pursuing an outcome that is likely to give you back some of the things you sacrificed along the way. 

Knowing when you’re ready to sell is also unique to your experience and the context is personal. Don’t ever let anyone tell you it’s time to quit. But at the same time, don’t let anyone tell you to keep going when you know in your heart you don’t want to.

If you have decided you want to sell, take these key steps before embarking on the process.  

Build consensus

You will increase your chances of a successful sale by building consensus with your stakeholders as early as possible. This includes team members, investors, advisors and other parties with strong ties to your company.

You can either seed the idea of a sale or exit earlier in the process, or move quickly upon the decision to sell. If your startup is anything like mine, this will likely come as no surprise to many stakeholders.

Key team members will likely be thinking what you’re thinking: “This isn’t turning out how I had hoped” or “Is this where I think I can do my best work for the next ten years?” Having open and honest conversations with key team members will help to get alignment on the next steps for a sale, and to evaluate who has the stomach for it.  

For investors and advisors, the state of your business should be clear from your monthly updates if they have enough experience as operators or perspective across a portfolio. Truth be told, if you haven’t been growing quickly, they’ve likely written off your business in some capacity or another. Once you suggest a path to sell and get them a return on their investment (of money or time), they’ll likely be supportive. 

(Side note: Supportive is different than helpful. Supportive stakeholders provide words of encouragement and usually stay out of your way. Helpful stakeholders dig in, make introductions and help you polish your startup for potential suitors. Helpful stakeholders are incredibly valuable and can make a material difference in the outcome. More to come on this later.)

Buy yourself time

Selling a company, like fundraising, can be an excruciating and long process from start to finish. If you’re starting cold, you must find a way to buy as much time as you can. Ideally, find a way to scale down to get six to nine months of runway. Often, founders wait to sell until they have very little in the bank. Don’t let this be you. Scaling down can include layoffs, disinvestments, OPEX reductions and leadership payment deferrals. Simply put, do anything to buy yourself as much time as you can to run the process.  

Pick your coaches

You will increase your chances of success by learning from others who have already done what you’re doing. I spent the better part of a week reaching out to anyone I knew who had sold a similar business to uncover founders with potentially relevant experience. Find your coaches early in the process as they will be immensely helpful at every step. Coaches can be existing advisors or mentors, but they can also be peers from your extended network.

Get some rest

Be sure to re-energize before taking on a sale. Try to get into a good headspace and be excited about the work ahead. Go on a trip. Get a massage. Do mushrooms. The process of selling your company is both a sprint and a marathon. You’ll sprint at first to get as many meetings with prospective acquirers as possible. Soon thereafter you should work quickly to eliminate anyone who doesn’t seem like a good fit (until you have your first offer—more on this later) to focus your time and effort on running the marathon with the best leads. Obstacles will arise, deals will die and then revive, and acquirers will go dark. 

Ensure you have the energy and patience to tackle these challenges as they come. 

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