By Darryl Orht
When Deciding Whether to Turn Your Company Over to a Larger One, Consider These Things.
All entrepreneurs dream of the day they sell the business. Cashing out, walking away and spending the rest of their days on a beach. In reality, few business owners get this opportunity, though plenty get the opportunity to sell.
The decision to cash out will be an easy one for many entrepreneurs. But selling your business to a larger company and sticking around comes with a whole different set of issues. Most obviously, you won’t actually be quitting your business. Instead, you’ll get a boss. Are you ready? Is it time? I sold my digital agency two years ago, and here’s what I learned in the process.
It’s time to sell if you’re not having fun.
Selling isn’t always a financial decision. People sell for a variety of reasons: cashing out, survival, moving to the next level. For me, selling was a chance to have more fun. I had been coasting for at least a year or two longer than I was comfortable with, and not feeling as challenged day-to-day. Selling would allow me to take on new challenges, experience things that I hadn’t done before and grow personally.
Ownership isn’t as important as you think.
You’re a business owner. You’ve probably worked for jerks, poor managers and people without vision. Some of these people were probably part of what spurred you to start a business. For some, the thought of selling to work for someone else is horrifying.
I learned that ownership wasn’t a primary motivator in my career. I cared more about creative challenges, personal growth and culture — things that don’t necessarily require ownership. And though it’s rare to experience all these things at a single company, it is possible. And it’s possible without ownership. If you haven’t accepted that fact, you’re not ready to sell.
If you are ready, here are some things to keep in mind:
There are no secrets in business.
We live in a social world. Companies share financial and other information with employees. Open information, social sharing and transparency have lead to a new climate where it’s difficult to keep things undercover.
So if you think you’re going to keep a sale entirely secret, you’ve got another thing coming. Your employees are not blind. You hired them because they’re bright, intelligent superstars. Even if you did manage to keep things from them, you’d create a world of resentment on announcement day.
While you don’t have to tweet “Meeting with company X about an acquisition,” you do owe at least your senior management team the respect of knowing what’s about to go down. Advance communication with your team will settle their anxieties, help them understand your motivations, goals and vision, and very likely give you some new insights.
You’ve read the headlines, something like, “Company X sells to Y for $4.5 million.” It’s never that simple. No matter how small the transaction, it’s highly unlikely that your suitor will show up with a suitcase of cash while you hand over the keys. Deal structures can vary wildly, depending on your motivations and the acquirers’ goals. What’s important to you financially? What do you need to get, and when and how?
If you haven’t gone through the process, consider hiring a consultant who can help you navigate it. And don’t go into the sale thinking that it ends when someone hands you a giant check.
Don’t sell if you aren’t ready to walk away from it all.
Maybe you’re not selling to cash out and live on the beach. Maybe you’ve been promised that you’ll lead the new merged entity just as you always have and that nothing will really change. It will. There will be good things, there will be awesome things, and there will be things that frustrate you to your core. Don’t go into a purchase deal assuming anything other than this, and most important, be prepared for the worst. What if you’re miserable one year from now? Could you pick up and leave the company that you founded? Are you emotionally and financially ready for that? Knowing that’s a possibility will help you deal with it if the day comes.
Can it work? Absolutely. I sold my agency in 2010, got bored with the climate that was eventually created and then left it all to be an employee at another firm. I don’t regret a single move, and I’m happier than I’ve ever been in my career.
Success can be more fun than living at the beach, if you really love what you do in an inspiring, vibrant place.
Even if you’re not the owner.