Looking for a way to capitalize on your company's rapid growth? Instead of raising money from investors, you might want to consider an outright sale.
Why? The market for U.S. business sales is hotter than it's been in years, according to company sales site BizBuySell. Improving small business financial performance has helped drive up the median sale price of businesses listed on the site by 12 percent year-over-year, according to BizBuySell's latest quarterly report. The number of businesses listed for sale also reached its highest level since 2009.
One entrepreneur who's taken advantage of the current seller's market is Bobby Campbell, co-founder of Columbia, Missouri-based advertising and marketing startup AdKarma. Last December, Campbell sold his company--which recently claimed a spot on the Inc. 500 list of America's fastest-growing companies for the second consecutive year--to rival Blinkx for $20 million. Here's why he cashed out rather than taking venture capital.
1. If you wait, you could miss your window.
In many industries, the acquisition market heats up every few years based on new and disruptive technologies. If you pass on an opportunity to sell today, there's no guarantee your company will still be in demand when you eventually do want to sell. "If we took money and stretched that time to build the company, we potentially would have missed the opportunity to be acquired," Campbell says.
2. You risk getting a smaller slice of the pie.
Even if your company grows substantially after taking outside investment, your investment partners will take a proportional chunk. This could make it hard for you to walk away with significantly more than you would have had you cashed out earlier. "The difference between what we would have gotten in an acquisition [later] may not have been very much different, and we would have spent three or four more years getting to that same point," Campbell says.
3. Entrepreneurs like being their own boss.
Your investors may have the same vision for your company as you do, but working alongside financial partners is an adjustment that some entrepreneurs struggle with. "You lose a little bit of that nimbleness to make the decisions you made without outside money," Campbell says.
4. Selling gives you the chance to start anew.
There's a reason the term "serial entrepreneur" exists: Entrepreneurs like starting fresh with new startups. Less than three months after his last day at AdKarma in May, Campbell founded an entertainment production company called Good Wizard Productions. "It's something in the nature of successful startup people to want to do it again and keep working on creating something new," Campbell says. "That's how I am."