There’s a lot of talk everywhere about starting a startup, but what about if you’re thinking about selling it? This is often the major difference between small business owners and entrepreneurs: Entrepreneurs often start a business because they see potential to sell it in a few years for a profit. Some people dream about getting acquired by Facebook (entrepreneurs), while others see selling the business as another example of the big buys bulldozing over small businesses (small business owners.) There can be some great things that come with acquisition, but there can also be a downside.
It’s crucial to have an exit plan in place even if you can’t fathom every selling your business. Should times get tough and you’re desperate for cash, or perhaps if a giant like Google offers you a price you can’t refuse, you don’t want to start hatching an exit plan right then. If and when a major corporation starts wooing you, it’s easy to get blinded by it all. A big company can make promises impossible to keep, such as an acquisition "would change nothing," except that the founders are suddenly rich.
The Real Work Begins
Even in a case of a flawless acquisition/sell, it’s not as easy as you think—in fact, it’s kind of like buying a house. A financial advisor and/or small business attorney is invaluable during this time. The first official order of business is a letter of intent. This can take well over six months to execute with a lot of haggling and negotiating taking place. You don’t want to glance over any of the fine print, you need to digest it, and you also shouldn’t obsess over the acquisition until the first step is complete.
What many founders don’t expect is a feeling of numbness instead of anxiety, excitement, or elation. It’s intimidating to work with a big buyer, and even with all the assurances of a contract, it’s human nature to second guess yourself. Will you suddenly be a middle manager who’s in position just to appease your ego as you watch “your” company slip from between your fingers? There are major differences between “running” a startup compared to being a division within a massive corporation.
The Details
For many founders, even those who learned from the greats, they ultimately decide to move on from “their baby” because it’s just not the same. This is when those negotiations really kick in. Some founders are surprised that they can potentially lose millions in escrow if they leave their position. This can force founders to stay on and watch their company get torn apart without the option of walking away. You likely won’t be in control of your work environment, your hours, your vacation, your leave time, or even what time you’re expected to show up to work. This may be an example from the extreme side of acquisitions, but it’s fair warning.
If it sounds too good to be true, it probably is—and that includes anything to do with acquisitions. Nobody is going to give you millions (or even thousands), and not change anything. Never assume your business will remain the same after a sell. There are now two visions, and the buyers’ trumps yours. The entrepreneurial spirit of your company will fade away in favor of Corporate America, which means you need not just an exit strategy but the ideas you will use for what’s next in your plans.
This isn’t meant to scare you away from selling your company. It’s simply a means of warning founders that with any major move comes major changes and adaption is key.