How to prepare and sell your startup? In other words, what do you need to do to successfully prepare to sell your startup?
This is a fantastic time for many entrepreneurs to sell their startup ventures.
Given this is a lot different from your childhood lemonade stand or reselling pokemon cards on eBay.
Or even pushing your startup’s product, founders need to be prepared to put in some work to seal an attractive sale.
This really all comes down to three main categories to focus on; what you need to learn, and who you need to hire.
And also what needs to be done to ink the deal and get to the closing.
Remember that mastering the storytelling side and how you are positioning your business is critical when it comes to engaging and speeding up the process. This is done via your acquisition memorandum. This is super important to reach a successful acquisition. 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.
Here is the content that we will cover in this post. Let’s get started.
- 1. What You Need To Learn To Prepare & Sell Your Startup
- 2. M&A
- 3. Contracts & Documents
- 4. The Best Negotiation Tactics
- 5. The Process
- 6. Due Diligence
- 7. Who To Hire To Sell Your Startup
- 8. M&A Advisors
- 9. New Team Members
- 10. Lawyers
- 11. A Great Accounting Firm
- 12. Marketing Experts
- 13. What You Need To Do To Prepare To Sell Your Startup
- 14. Pick Your Ideal Type Of Exit
- 15. Identify Your Ideal Buyers
- 16. Prepare Your Pitch Book & Pitch
- 17. Prepare Your Data Room
- 18. Marketing & PR
- 19. Summary
What You Need To Learn To Prepare & Sell Your Startup
Did you think that you already learned a lot as you set up a business, sold a product, mastered fundraising, and managed a company?
Know that selling your business brings a whole new leap in learning. One that represents a significant jump in knowledge and skill.
Once you have gone the full cycle, you will have joined a smaller group of elite entrepreneurs who really understand the complete picture.
It will definitely give you an edge through the entire process the next time around.
Still, to get there, these are some of the things that you will want to invest in learning.
It is up to you whether you do that through books on selling your business, podcasts, or hiring a coach.
Or bringing in new team members that have done it multiple times already.
There is more than one way to exit your startup. It is only responsible to learn about the different types of mergers and acquisitions deals.
Find out which may be the best match and most profitable for your company and the stage you are at.
You may also want to begin doing some research into valuations and what your business may be worth to buyers today.
And on what types of terms you might expect to get.
The sooner you can get ahead on this learning the better. Hopefully, you are reading this even before starting a company.
If not, there is no time to waste in learning all you can before you try to position your startup for this phase of the journey.
See How I Can Help You With Your Fundraising Efforts
See How I Can Help You With Your Fundraising Efforts
Contracts & Documents
There are a lot of legal documents, addendums, and contract pages involved in selling your startup. Including the LOI and purchase agreement.
The more you can learn about these documents, their clauses, and various terms, the better prepared you will be to make swift and sound decisions. And negotiate the best possible outcome.
The last thing you want is to be signing under pressure at the last moment, without time to read everything you are supposed to sign.
So, take the time to understand how to prepare and sell your startup.
The Best Negotiation Tactics
The ultimate net outcome of selling your business, and how well you are set up for what’s next will depend heavily on negotiations.
There are all types of things you may not have even considered trying to negotiate. Or didn’t know were possible to negotiate.
A lot of it may not be in ‘standard’ contracts.
You also want to understand your buyers’ negotiation strategies so that you can counter negotiate, and drive the deal you really want and need.
What often proves the most stressful to startup founders and business owners in the process.
If you’ve ever bought or sold a home, then you quickly learned that signing the deal was only the very first (and easiest) step.
That’s when the real work starts. It’s the same here, multiplied many times.
If you don’t know the process, you are going to be stressed. It is going to be hard.
You are probably going to end up with a worse deal than you thought you had.
You may find it very tempting just to throw it all away. Learn the steps. Understand just how long the time frame can be.
One of the most pivotal and underestimated parts of the process of selling your startup is the due diligence period.
This is where your prospective buyers will dig into absolutely everything about your business.
They are going to want to see every document, contract, invoice, receipt, and sale.
They are going to want to talk to your team, your vendors, and customers. This is a process that can last for months.
A lot of time and value can be lost in this part of the process. It will likely be the most grueling.
One with lots of calls and emails and attempts at renegotiation.
One of the most critical elements of planning an exit strategy is knowing how to value your company. If you need more information on how to do that, check out this video I have created.
I have put together some practical tips that you’re sure to find helpful.
Who To Hire To Sell Your Startup
One of the most important and often overlooked parts of selling your business is hiring the right help to get through the process.
If you don’t have them on staff or screened and on retainer already, here are some of the hires you may need to make in the days and weeks ahead.
Even if you aren’t heading into an immediate sales process, the earlier that you can vet and line up this talent the better things will go.
Have your list of candidates ready when you’re working out how to prepare and sell your startup.
There is so much to not only learn but to master when it comes to M&A, that you are going to be best served by bringing in an expert.
M&A advisors can help prepare you, evaluate your options, market your business, and make the right connections in the right way.
They’ll also protect you through the deal, and help coordinate the transaction while enabling you to negotiate the best deal.
At a minimum, you owe it to yourself, your company, and any other stakeholders to at least investigate how they can help.
And the value that they can bring to the table.
New Team Members
Once you seriously begin trying to sell your business or entertaining offers it is going to take up a substantial percentage of your time.
This is really a full-time job for a whole team for months.
If you are fully engaged in selling your business yourself, then you cannot be giving your business the vital attention it needs at the same time.
It is going to be more important than ever to be operating at maximum performance and continuing to grow the business faster than ever.
This means it will be wise, if not necessary to either bring in new executives or specialist team members to run the exit process.
Or to take over your roles in operating the business, while you focus on the deal.
It’s one of the most critical steps when understanding how to prepare and sell your startup.
Whether you are using an M&A advisor, business broker, or investment banker, you will still need your own lawyers through this process.
If not to ensure you are getting the best deal, and that things are written the right way, to protect you from liability.
You may even need a corporate attorney for the business and your own personal one.
This is a big deal, with far greater, broader, and deeper ramifications than you can see right now.
It is going to be worth every penny to recruit the best law firm you can afford.
A Great Accounting Firm
After you’ve reached a preliminary deal with your prospective buyer a lot is still going to depend on your accounting.
It needs to be clean, professional, organized, and polished.
You may also need to develop new financial statements, a P&L statement, and financial forecasts.
In this process, you may also be able to find ways to optimize your finances, reduce taxes, and increase profitability.
Selling your startup successfully and on the optimal terms can greatly rely on your marketing and pitch materials.
If you don’t already have them on board, then you are going to want to at least have freelance copywriters and graphic designers on call.
These professionals will aid in crafting a great deck, pitch, and supporting materials.
Keep in mind that in fundraising, storytelling is everything. In this regard for a winning pitch deck to help you here, take a look at the template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.
What You Need To Do To Prepare To Sell Your Startup
Now that you’ve invested in learning, and you’ve hired the help you need, or have at least begun screening them and set aside a budget for them, what steps should you be taking to sell your startup?
Pick Your Ideal Type Of Exit
While it is always wise to have a plan B and C, you do need to decide which direction you want to go in to position for it.
Will you be shooting for a strategic acquisition? A financial acquisition? A certain type of merger? Or maybe an asset sale?
What is your backup plan going to be? An IPO? Raising another round of funding?
Have failsafe measures lined up when learning how to prepare and sell your startup.
Identify Your Ideal Buyers
Research, screen and make a shortlist of your ideal acquirers. Who are they? What should they bring to the table?
Be sure you are working all angles to make the right connections as early as possible.
Prepare Your Pitch Book & Pitch
It is up to you to drive the deal, maximize your value, and earn the power in negotiations.
This all starts with and is powered by your deck, pitch, and presentations.
With so much on the line in terms of dollars, the future of your team, and your mission and reputation, any investment you make here will yield great returns. Give it the attention it deserves.
Prepare Your Data Room
Begin loading and organizing your online data room for your buyers and their due diligence.
You don’t want to be the reason that your transaction is slowed down, and ends up taking many more months than needed, or even falls apart.
You may wish to stagger this, with some data available early to prospective buyers who are taking the first glance.
And a far more robust data room with every detail you will need to release according to your draft agreement.
Marketing & PR
Don’t wait until the last minute, and constantly find yourself behind and rushing out poor marketing and press because you didn’t get ahead.
You need your people, materials and to be in the publishing queue well ahead of time.
This includes your ramp-up in business before and during the transaction, and specific positioning to secure your target buyers.
You’ll also focus on the content that will increase your value, and then maximize the deal as it gets done too.
Selling your startup can be one of the greatest moments of your lifetime. How well it goes will greatly depend on you.
There is a lot to do and can do to maximize the opportunity and moment. It is your responsibility as a business owner to do so.
Start learning, hiring, and preparing, as well as taking action on these steps as early as possible to make the most of it.
Not only will the outcome of this startup depend on it, but all of those that it touches, and what you will be able to do next.
As well as how easy your next chapter in life and business goes as well.
You may find interesting as well our free library of business templates. There you will find every single template you will need when building and scaling your business completely for free. See it here.