9 most important points when selling

Do not be fooled - everyone wants to sell his startup. We all admire how Groupon and other companies are turning into billions of giants, although, in general, this is a lie to themselves. Even Larry Page and Sergey Brin wanted to sell Google for $ 1 million to Yahoo within 10 seconds after starting work, but the latter refused.

As soon as I start building a business, I want to sell it. I have already sold 4 companies and invested money in dozens of others that are at different stages of sale. This is not very noble, rather the opposite, but everyone builds a facial expression, as if he is on a first date. However, later, in the process of these dates, you begin to understand who will beat their children and who will not. Therefore, it is very important to always keep in mind the following nine points and follow the process so that you will not be beaten along with your child, or, even worse, killed or deprived your offspring.

Speaking of “process,” I mean absolutely everything you need to do from the moment you start your own business until the moment you receive cash for your share in it. Any actions seek precisely this final moment.
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1. Get ready for the year ahead . Prepare yourself for a meeting with anyone you want to sell your business to. Start talking to them now. The first company I sold (in 1998) began to negotiate with all advertising agencies a year before the actual sale. I was not ready (I mean, I would have sold it right away, but it was too small), so I kept every potential buyer informed with monthly mailings. And breakfast or lunch every three months, just to tell the news about the business, in general. By the time I was finally ready to sell the company, we received 4 or 5 urgent offers. Finally, we sold it to a company that I hadn’t even contacted before, but she heard about us because everyone else was discussing it.

2. Follow rule 20: 6: 3: 1 . In 2004, the company where I owned a small share (an institution for psychological patients - no, I was not one of the patients) wanted to sell myself. The founders were investors in the fund I founded. They received an urgent sale offer for $ 10 million, to which I replied that I wanted to try to sell this business.

One of my friends worked in the business of brokerage sales of small companies for about 30 years. It was he who told me about rule 20: 6: 3: 1 that worked here. We invited 20 companies that have already worked in the same sector as our startup (including companies that are simply engaged in the resale of property, government agencies, private offices - all) and were interested in acquiring such an institution. Then some kind of magic started to happen. We were invited to 6 meetings, 3 of which were very serious, and eventually led to one sale offer. After we took the most expensive offer (where the price was offered almost twice as high as that of competitors) and sold this business for $ 41.5 million. The company, whose crude income was only $ 1 million.

3. Ask for advice / share ideas . The key idea of ​​all this is to bring the foot beyond the threshold of a potential buyer. For each company that you can approach, you need to prepare ten ideas, how you can easily integrate into their business to generate profits, new buyers, etc. Meet with them (and they will want to meet with you, if at least half of your ideas are worthwhile - they still have nothing to do all day), show them your ideas. Ask for their advice, ask about how they imagine the best way to integrate with your startup, and modify your ideas. Make sure every idea can generate profit. The bigger, the better. What does this give you? You get your representative in the company (CEO? Head of development? Head of marketing or sales?), And he in turn receives all the arguments in order to "sell" your business to the most important boss, or shareholder. Without such a representative, you will never sell your business to any company.

When I tried to sell Stockpickr.com (I bought it from TheStreet.com in April 2007), I talked to Yahoo, AOL, Google, Reuters, Forbes, and several other companies. Even though in the end none of them bought this business, I gained valuable business relations with several of them, which helped me in further business activities after the sale of Stockpickr.

I have one friend who does the exact opposite. He trashes and scolds every company he deals with. By doing this, he thinks that these companies will do the same to him, which will result for him in intercepting part of their audience. And, I will tell you, in short periods of time it works very well, but in the long run will only lead you to lose.

4. Before the negotiations, come up with a mathematical formula that evaluates your company. A very simple equation that you and the buyer will agree on without even looking at the numbers instead of the variables. For example, we evaluate ourselves as 6 profits of future years, based on the mass of the consumer. If you are told no, you answer: “OK, half of it!”, And you will most likely be told yes. In the case of the stockpickr.com / thestreet.com deal, we assumed how much traffic we could get with them "behind the back", and based on their CPM indicator extrapolated to our advertising opportunities, we tried to calculate the approximate profit so that the buying company would immediately I liked it. As soon as we heard approval from their side, we only needed to find out their real CPM and how much traffic we could generate.

Many companies that sell to giants like Google or Yahoo simply use their market competitors, which is also good. But you need to immediately determine who the competitors are, and what their numbers are. Because you can always argue that your company is better than the one that was last sold for X, because of A, B and C, which gives you arguments for negotiating with buyers for the sake of increasing prices.

5. During the negotiations, do not think only about filling your own price. As soon as you agree on the amount, and the shareholders agree to give you money, they will close the deal at any cost. But for you there is one more very important thing - to count everything that you need. Salaries, your incentives (bonuses) and packages of securities, shares of your employees, the date of the actual merger (end of the transaction), office, transportation, other expenses, liability, and so on almost indefinitely. Make sure your list is as long as possible, even longer than their own. Larry Brilliant, the former head of Google's charity and the former CEO of Softnet, once told me: "This is a way to exchange stones for diamonds." Anyway, you still get more than what was originally agreed.

6. After negotiations comes the most painful part. The deal is done, but it is not finished yet. You work for them, but in fact you still work for yourself. At any moment, everything can break. Whatever happens, do the maximum possible and make sure that your lawyers work hard every day, going towards the goal. It was the hardest part of my life in every deal. Make sure that all your debts are closed, everything that your buyer may not like should be destroyed, eliminated, without any consequences, so that the buyer never “jumps off”. One company tried to borrow money from me on the closing day. NEVER! Another company wanted me to sign a partnership agreement for 6 years. NEVER! Make sure that the structure of shareholders is clear, and you know exactly who owns what, if your transaction is based on the sale of securities. We cannot allow you to get a CEO agreement at the last moment, otherwise you can never sell your stake. There are a huge number of things that can go awry at the very last moment (their number deserves a separate publication), so you need to have a very good lawyer and be sure that you know even more than he and are willing to ask him not the most convenient questions. (if your relationship is formal).

And yet, no less important, continue to do your business after the transaction on which you agreed, but have not yet closed. Continue to build strategic relationships with prospective buyers. Keep filling the news with the company that is going to buy you, showing that your business is doing great and you continue to work hard, do not be afraid to flaunt your negotiations with other companies (if at the last moment everything, I apologize, you will find you have another buyer).

7. Be visible . As soon as you start talking to the company about strategic anything (before you shake hands), they will help you in all available ways. You should do the same. Give advice on how to make their business better, more profitable, introduce them to your competitors. Find a girl / boyfriend for the CEO. Take them to football. Have dinner together. Go on vacation with their families. Strain your media contacts and push a couple of good stories about them. Pull the rabbit out of the hat at their charity parties. Be a psychoanalyst at four in the morning, if required. Express business ideas that you will deal with on their board of directors. I do all this, and even more, in every takeover transaction in which I am involved.

8. Continue your business .

9. And finally: do not screw it up . The best way to sell a business is to stay in the game. Avoid blunders.

Let's imagine that you signed the deal and now you are waiting a month or so for the lawyers to put the last point on all the documents. The moment will come when you will be extremely overwhelmed, almost paranoid. This is a law of the universe, not a theory. Here is what you need to do: go to the nearest shooting range, take a rifle and as many rounds as you need. Then aim at the center of the target and shoot until you are so exhausted that you can no longer move.