Thinking about selling your business and wondering what to are the things to look for? Here are ten things to consider before an acquisition in order to come out on top when doing M&A.
Exiting a startup for millions or even billions may sound great. However, it is quite different than selling your old car, home, or product. There is a lot to the transaction. It can impact you on many levels. The payday may be life-changing.
Just make sure you know what to expect and have thought it through before entertaining offers or hiring an investment banker.
The Ultimate Guide To Pitch Decks
1) Can You Survive the Due Diligence?
If you thought to launch a startup, fundraising and maintaining growth was a challenge, you haven’t seen anything yet. This will be the most grueling challenge you’ve faced yet. Can you survive it emotionally, mentally, energy-wise and mathematically?
Many entrepreneurs go through it several times. A few do it almost every few years. Though you do need to be prepared. Expect every piece of communication and documentation to go through the grinder over the months and years ahead. Try auditing your own business from a buyer’s perspective.
Practice due diligence on your own company. Where are you weak? Where will the problems be? How can you legally and ethically close those gaps and polish it?
In any case, this is the moment where you will be backing up all the claims made on your acquisition memorandum template which captures the essence of your business. For a winning acquisition, memorandum template take a look at the one I recently covered (see it here) or unlock the acquisition memorandum template directly below.
2) The Taxes
Small business owners tend to write off everything they can to minimize tax liability. The less profit you show, the better when April tax filing season comes around. Of course, the opposite is true when it comes to selling your company.
To get the best price you are going to need to show the most possible profit. That means the IRS is going to be expecting an even bigger payday. Maybe even your state too. Make sure to budget for this.
3) Cash Flow Gaps
If you switch to focusing on a sale instead of raising another round of funding, what cash flow gaps might you experience?
You don’t want to have to negotiate out of a desperate situation either. You don’t want to deplete your cash and mount up the debt and have the other party trying to renegotiate at the last minute. What if the sale falls through? Will you have enough funds to get from there to a new round of capital in the bank.
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