Corporates come knocking
CONSIDER YOUR PRICE, PLANS Ask yourself: what am I going to do after I have sold my business?
Entrepreneurs start businesses for many reasons. Some as a quest for financial freedom; others identify a need in the market and others are simply tired of the 9-to-5 routine. Whatever the reason, it is possible that a simple idea can turn into a relatively large, profitable operation. When that happens it is also possible that big industry players can take notice and all of a sudden your company is a target for acquisition.
It is no secret that many corporations have reached unprecedented heights through acquisitions. In fact, many corporations have a system that identifies potential start-ups as possible acquisitions.
They do this for such reasons as synergy, gaining market share, entering new markets or even eliminating future competition. Facebook is a perfect example, with acquisitions of Instagram and WhatsApp.
So what do you do when approached with an acquisition offer that has more zeros than you have ever imagined?
Firstly, ask yourself: what am I going to do after I have sold my business? You might not have anticipated early retirement, therefore what would be your next step? Some acquisitions are subject to you the founder staying on as CEO. However, answering to new owners of the business you built might not be something you envisioned.
If that is the case, you could start a new business in a different industry of course, because the acquiring party will most certainly make you sign a non-compete clause. Another option could be to start an investment fund that invests in start-ups or maybe it’s an opportunity for you to travel the world.
Another key consideration is how will this decision impact your finances? Yes, you might be receiving a lump sum from the sale of your business, but is that what you and your family need right now? Your business provides you with a steady, reliable income. Will a lump sum disrupt that system and cause a spending spree?
Thereafter, consider the selling price. Are they offering enough for your business and how did they determine that figure? It might be a good idea to bring in your own evaluator.
But all these questions are not as significant as the emotional ones. Building a business is an emotional journey that is difficult to let go. Additionally, entrepreneurs build a strong bond with their employees and their livelihood becomes a concern when a big private equity firm comes along that has a reputation of using cost-cutting measures in the line of retrenchments.
At the end of the day the decision boils down to what you desire your business to accomplish and if part of that involves leaving the business to your children – then selling is definitely not an option.
Munya Duvera is CEO of Duvera Elgroup