Podcast Summary
Lessons from selling two companies: Understand business value, prepare for due diligence, and effectively communicate with buyers to sell a company successfully.
Selling a company is not as simple as creating a sensational product and waiting for offers to roll in. Based on my experience selling two companies, once to a large corporation like Twitch (owned by Amazon) and another to private buyers, I learned that the process requires preparation and practice. You might not get the opportunity to sell a company often, so it's essential to be well-informed and ready. During my presentation, I shared lessons from both experiences, emphasizing the importance of having a clear understanding of your business's value, preparing for due diligence, and effectively communicating with potential buyers. Remember, selling a company is a significant milestone that requires careful planning and execution.
Determining if you truly want to sell your business: Stay informed about marketing trends to make your business attractive to potential buyers, but carefully consider if selling is the right decision based on market and personal factors.
While great companies may be bought, most companies are sold. Entrepreneurs who are considering selling their business should first determine if they truly want to sell, as they may be more focused on growing the company than on selling it. Staying informed about marketing trends can help entrepreneurs run their businesses efficiently and effectively, making them more attractive to potential buyers. The HubSpot 2024 State of Marketing report provides valuable insights into current marketing trends and their impact on businesses. To learn more, visit hubspot.com/stateofmarketing. Ultimately, the decision to sell a business should be based on careful consideration and a clear understanding of the market and trends.
Assessing belief and motivation in selling a business: Consider personal belief and motivation before selling a business. Discuss the sale with transparency, but manage psychology and communication effectively.
When considering selling a business, it's crucial to assess your belief in its potential and your personal motivation. Ask yourself if your belief is stronger now than when you started, or if it's waning. If you receive a great offer, consider it, but only sell if you no longer believe in the business or if you're no longer passionate about running it. Discussing the sale with your team and investors can be tricky, and transparency has its drawbacks. It's essential to manage your psychology during the sales process and communicate effectively with your co-founders and investors. Remember, belief is a significant factor in taking massive action and achieving results.
Preparing for a Company Sale: Key Points: To maximize the value of a company sale, be transparent with employees, identify potential buyers, build relationships, surround yourself with trusted advisors, and effectively communicate your company's strengths.
When considering a potential sale of your company, it's important to prepare and understand the process from start to finish. Here are some key points: 1. Be transparent with your employees about the potential sale and what it means for them. 2. Identify potential buyers and understand their motivations. 3. Know who to contact and build relationships with key decision-makers and champions on the other side. 4. Surround yourself with trusted advisors, or deal doulas, who can help guide you through the process. 5. Demonstrate value to potential buyers and effectively communicate your company's strengths. By following these steps, you'll be better equipped to navigate the sale process and maximize the value of your company.
Understanding Buyers' Motivations: Secure a meeting by using intent-driven language and appealing to strategic reasons like CEO interest, executive promotions, catching up to competitors, fear of competition, and acquiring unique talent.
Companies are bought for both financial and strategic reasons. Financial reasons are clear, as buyers seek profitable businesses with strong revenue and EBITDA. However, strategic reasons are equally important. These include CEO interest, executive promotions, catching up to competitors, fear of competition, and acquiring unique talent. When approaching potential buyers, it's essential to understand their motivations. Reach out to executives, investors, advisors, or cold, and use intent-driven language such as "discuss a partnership" or "we have an acquisition offer." The goal is to secure an in-person meeting.
Building relationships with potential acquirers: Focus on the acquirer's priorities and position yourself as the solution to increase chances of a successful exit.
Building relationships and understanding the needs of potential acquirers is crucial for a successful exit. This can be achieved through networking and nurturing dependence. When approaching potential acquirers as a stranger, corporate development is a viable option. However, the key is to tap into their emotions and desires by framing your proposal in a way that addresses their pain points and priorities. A clear example of this approach in action is the sale of Twitch. The speaker met an executive from the company at a social event and used this connection to gain insight into the company's priorities. They identified a specific problem the company was facing and positioned themselves as the solution by highlighting their expertise and resources. In contrast, most startups approach potential acquirers with a scattershot approach, listing their features and accomplishments without considering the acquirer's needs. By focusing on the acquirer's priorities and positioning yourself as the solution, you increase your chances of a successful exit.
Understanding Corporate Needs: To successfully pitch to a corporation, tailor your proposal to their specific needs and concerns by asking insightful questions, gathering intel, and presenting a clear, compelling case.
When pitching to a corporation, it's essential to understand their current priorities, pain points, and decision-making process. Instead of just presenting your solution, you need to demonstrate how it addresses their specific needs and concerns. This can be achieved by asking insightful questions, gathering intel from past experiences, and presenting your proposal in a clear and compelling way. Another effective strategy is to do the work for them by creating a one-pager or memo that outlines the benefits of your proposal from their perspective. This not only shows that you've put thought into the potential partnership but also makes it easier for them to evaluate the opportunity. Ultimately, the goal is to build a strong rapport with the decision-makers and position yourself as a valuable solution to their business challenges.
Making Acquisitions Easy: Communicate Benefits, Align Strategies, and Have Financials in Order: Effective communication, strategic alignment, and financial preparation are crucial for successful mergers and acquisitions. Inspiring hope and negotiating in parallel can lead to better deals.
Successful mergers and acquisitions require careful planning, persuasive communication, and strategic negotiation. The speaker emphasized the importance of making the acquisition process easy for potential buyers by clearly communicating the benefits, aligning strategies, and having financials in order. Additionally, maintaining multiple options and inspiring hope in potential partners can lead to better deals. It's essential to negotiate in parallel, leave breadcrumbs, and communicate with integrity throughout the process. Ultimately, the goal is to turn your company into a "giant buy button" by reducing friction and making the acquisition process as smooth as possible.
Maintaining relationships and momentum leads to closed deals: Follow up quickly, maintain deal momentum, have multiple options, don't get emotionally invested, and remember that deal failures are normal.
Persistence and momentum are key in closing business deals. The speaker shares his experience of a deal that fell through initially but was later closed due to maintaining a good relationship and sprinting hardest during the critical moments. He emphasizes the importance of following up quickly and maintaining deal momentum. Additionally, having multiple options is crucial to having leverage in negotiations. The speaker also encourages entrepreneurs not to get too emotionally invested in the outcome and to celebrate their successes. Lastly, he reminds us that deals falling through is a normal part of the process.
