Many people go out there to build the next Facebook or Snapchat. They dream of the opportunity of selling their company.
But what do you do once you actually get to that point?
Pete DeAngelis has been at this point many times in his career, as both a serial entrepreneur and angel investor. Being on both sides of the equation by selling businesses and in investing into others, he has seen it all.
These are Pete's top tips to maximize the value out of the sale of your company:
1. Dot your I's and cross your T's
If you've already raised capital, you understand just how much of a pain the due diligence process is. When you go to sell your company, it just becomes so much more painful.
When it comes to your books, keeping detailed records is a must. The more details you have tracked, the easier your sale will become. Make sure to keep up with documenting all of your key business agreements for easy reference.
2. Document your KPI's (key performance indicators)
Every company who goes through an acquisition has to pass due diligence. Due diligence is when a team begins to ask you questions and goes through your books. By having these KPI's on hand, they will help you when you need them the most.
3. Run your books like a public company
The company that is going to be acquiring yours just might be publicly traded. You want your company to be as in tune and aligned with that company's processes and procedures.
Four years before Pete sold his last business, he made a conscious decision with his CFO to run it like a publicly listed company, except with the super expensive SarbOx provisions.
Imagine how surprised and pleased the acquirer was (yes...a public company) when they saw how easy it would be to align his company was with theirs.
4. Dedicate a few hours a month to documentation
It may sound like a huge distraction from running the business, but it really isn't that hard. Between Pete and his CFO, they only spent about an hour a month just making sure everything was in order. This allowed them to stay more organized when they had to submit their financials to the merger and acquisitions team without scrambling for paperwork.
5. Be prepared to answer questions
When you are sitting at that conference room with all these analysts, they are looking for ways to chop down your company to give you the least amount of money possible. Your job is to impress them by doing what others don't.
Every time you answer a question with 'I don't know' or 'Let me find that answer for you', the value of your company drops, instantaneously. When you say it once, these analysts will look for more questions you can't answer. The more times you say this, the lower your company is valued. Do this too many times and the deal is off the table.
Pete understands that what will impress them the most, aside from a stellar fiscal performance is having the answer to every question right at your fingertips.
When you answer every question with immediately available data, your potential acquirer shifts their mindset. Instead of thinking of how to devalue your company, they begin to ask less questions because they believe that you have the answers to those questions right on hand as well. Pete says by doing this, they will be under the impression that you and the company really have your act together.
The only way you will have all that is by doing all these 5 things and storing them in a data room.
But by doing so, you will reap massive rewards.
Have you done something similar when you sold your business? Did it help you maximize your value? I'd love to learn more! Comment below.