From Startup to Sell-Off: 3 Ways to Prepare for an Acquisition

With the end goal of selling a business, crucial early steps can maximize your success at exit.

Written by Justin Cowan
Published on Apr. 06, 2022
From Startup to Sell-Off: 3 Ways to Prepare for an Acquisition
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While starting a business and getting it off the ground is hard, taking it to the next level and selling it can be even more challenging. 

Entrepreneurs set their immediate attention on being “the next big thing” or the “most innovative product in the market,” but many overlook their exit strategy. And even if selling is on the radar, it can feel like a distant thought at the beginning. However, there are critical steps you should plan for at the startup stage if an acquisition is your end goal.

As businesses mature, a sale may be a sign of great success, but in reality, an acquisition or further capital funding is usually required to continue growth in the business. Acquisitions offer many benefits: 

  • New resources
  • Fresh perspectives
  • Access to essential capital for future expansion 

Once the business reaches this stage, a hefty process quickly begins, from finding the right buyer to ensuring everything is in order for a seamless transition. No matter the size of the company or the industry, there are a few key considerations to prepare your business for a sale. 

Waiting until the last minute to make these changes may seem impossible, so you should implement these strategies when you are still in the early stages of building your company to ensure that you have all the pieces in place when it comes time to work with prospective buyers.

3 Ways to Prepare for Your Startup’s Acquisition

  1. Clear the path to a sale with the right plan and people in place.
  2. Invest in your company’s technology infrastructure early.
  3. Get your financial and legal house in order for a smooth transition.

 

Have the Right Plan and People in Place

Startup teams should be handpicked, requiring careful consideration to ensure every person serves a specific function. Founders should be unique in their skill sets and bring both talent and knowledge to the business that serve critical areas. Finding these people is more science than art, and expanding your team on the road to a sale requires even more precision. 

The first step to any successful sale is building the financial organization. Identify the best CFO, controller, accountants, attorneys and brokers to help guide the business through the process. Taking advice from leaders who have experience and expertise with acquisitions will save the company time and energy. 

With the right team in place, executives should develop an extremely clear business strategy. Fully mapping out your sales plan for year five on day one is unrealistic, but you should consider early on how the business will scale year over year. The business strategy will serve as the guiding principle for your business and be required on the road to a sale. And while investors can help scale a company, a business strategy should be firmly in place by then. 

Investor decisions are another important factor to consider. Entrepreneurs and their team of experts should research their preferred investment partner and plan how to market the business to that target. An acquisition from a technology partner is very different from raising capital or the path to IPO. 

Read More Finanicial Insights for EntrepreneursHow Founders Can Win Seed-Stage Funding

 

Invest in Your Company’s Technology Infrastructure Early 

Wise entrepreneurs invest in their technology infrastructure early on to save time, money and resources. Technology adds value and credibility as the company heads toward a sale. Integrated business platforms like Oracle NetSuite can automate tasks, deliver key data insights and streamline business operations across financials, accounting, supply chain, manufacturing and more. 

With the right technology in place, executives can spend more time innovating and less time running the day-to-day operations of the company. Also, when ramping up for sale, these tools can pull data from across the business to ensure all records are accurate and operations are running smoothly. Remember, company data and records will be heavily scrutinized in the due diligence process.

A proven business platform that offers visibility and enforces best practices can mean the difference in a successful acquisition or the buyer backing out of the deal altogether.

The Leaders at Dropbox Know PitchingHere’s How to Master the Financial Slides in Your Pitch Deck

 

Get Your Financial and Legal House in Order

As the sale of a company approaches, business leaders must be in a position to hand off vital financial records and ensure all of its intellectual property is owned properly. 

Buyers will conduct their own due diligence, and the process needs to be as clean as possible to avoid the deal being delayed, or worse, falling through. Cloud enterprise resource planning software allows businesses to gain visibility into their financials and operations. This is not only helpful from a visibility level, but the system can aid the sales transition and serve as a central hub for the two companies to become one.

Perhaps one of the most overlooked areas in an acquisition is ownership of the company intellectual property. The company should completely own products, software, patents and even processes. To ensure they are, specific legal language and sometimes state and country laws must be followed. You should have a clear plan from day one of the startup to clearly define and protect what you’re selling. Consulting with intellectual property and patent experts from the beginning is extremely important down the road at acquisition.

 

The Takeaway

When leading a business from startup to sale, its crucial to align the business strategy early and build the right team and processes around it. Invest in the right technology to remain organized and hyper-focused and build a framework to protect and prove what you own.

A companys success at the time of a sale relies on great leaders who had the foresight to understand all the necessary steps along the way.

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