Five lessons from an eight-figure exit

Five lessons from an eight-figure exit
Five lessons from an eight-figure exit

The picture of a profitable founder is commonly one ringing the bell at a public market itemizing. So it’s straightforward to overlook that almost all of profitable exits are personal acquisitions. Having bought my influencer enterprise Fanbytes to international digital advertising company Brainlabs for an eight-figure sum again in May, I’m one among many who match into this class.
Founders ought to be sensible with themselves; the chances of constructing a billion-dollar enterprise are low. Even decrease are the chances that you simply’ll construct a billion-dollar enterprise and take it public. However, constructing a enterprise that sells within the tens of hundreds of thousands of {dollars} could be very sensible — with the correct staff, laborious work and a few good market timing. There’s multiple recreation with regards to entrepreneurship, and multiple measure of success for you and your staff. 
Here’s what we learnt about finest making ready your self for a profitable exit. 

Tell a narrative of natural development and untapped potential
The primary cause a enterprise is acquired is that the customer believes the corporate will be price considerably extra. This is the story they wish to hear, and as a enterprise which produced precise income, this wasn’t a tough story for me to inform. If you’re a seed or Series A-stage enterprise, chances are high you even have a superb story about your upside potential. 
We mapped out our development story clearly. We offered the explanation why we is likely to be engaging to that acquirer: 40% of our income got here from the US however we had no bodily US presence. Brainlabs does have US presence. And we offered the macro the reason why we’d proceed to be a compelling enterprise: as influencer advertising matured, it was clearly turning into part of the broader advertising combine. We positioned ourselves because the lacking piece for giant companies, which we actually believed.
If you’re presently constructing, you’ll discover this course of straightforward. You most likely have a wishlist of 10 or extra targets that you simply don’t have sufficient time or funding to assault. Look at that checklist from your potential acquirer’s perspective, and pull out probably the most thrilling two or three tales.
Remember that an acquisition is all about ensuring either side get worth from the transaction, so it’s vital you’re ready to consider that worth from earlier on.
Don’t overlook your knowledge room
Assume your corporation might be acquired at any cut-off date and get your knowledge room so as. A knowledge room is the place you retailer all the data regarding your organization, from authorized to finance, contracts and people-related information… every part. It’s what the attorneys, M&A bankers and company growth take a look at throughout due diligence. 
You don’t wish to be scrambling to get your own home so as when the letter of intent — a preliminary dedication from a purchaser — comes by. When we had been within the means of promoting Fanbytes, a number of the stress got here from our lack of a complete knowledge room. We had been helped by having nice attorneys who dealt with it, however we’d have saved time and pointless stress had we maintained an information room earlier.
If you understand your processes round knowledge are subpar or don’t exist in any respect, you’re increase a debt that’s painful to repay.

“If you understand your processes round knowledge are subpar or don’t exist in any respect, you’re increase a debt that’s painful to repay”
This type of rigour is the very first thing to be dropped when product launches, crises or holidays eat up time. Do your self a favour and rent an auditor on an annual foundation as quickly as potential.
Avoid channel dependence as quickly as potential
Buyers are in search of potential dangers to your corporation, and you’ll want to cowl your bases. This doesn’t come from a place of malice, it’s simply enterprise sense. Channel dependence is a primary instance of one thing that might be discredited.
Most tech startups focus totally on one channel: paid media and efficiency advertising. When you’re beginning out with an thought, some messy code and never a lot else, that is nonetheless the best technique!
However, it shortly turns into a nasty look. Ultimately, when you haven’t proven you may purchase prospects in not less than three channels, your worth dangers being diminished. And in case your rivals have proven you up by succeeding with a multi-channel buyer acquisition technique? Very dangerous look.
At Fanbytes we used content material advertising, gross sales, efficiency media and PR, simply to call a number of. We didn’t want every channel to be producing an equal variety of prospects however we would have liked them to be buzzing and in sync with one another.
Aim to diversify your acquisition channels and never solely will your dependency cut back, however the optics change into flattering to potential acquirers.
Swim in the identical waters as your acquirers
If you wished to ask somebody out, you’d have a significantly better likelihood of success when you acquired to know them properly beforehand — reasonably than asking for his or her quantity out of the blue!
Similarly, as your corporation progresses, try to be aiming to construct alliances with potential acquirers — even once you’re not able to promote. 
“You ought to be aiming to construct alliances with potential acquirers  — even once you’re not able to promote”
This serves a twin goal. Firstly, you gained’t really feel adrift once you wish to take a look at an acquisition. Secondly, you’ll learn the way these folks function. You’ll see how they obtain and assess alternatives, and also you’ll uncover the best way your business does enterprise.
We used M&A bankers in our acquisition, and it helped that we had been acquainted with plenty of the businesses who had been . 
You’re at all times going to be promoting in your corporation — whether or not it’s to workers, prospects or buyers. The sale of your corporation is the most important you’ll ever make. Take as a lot care with potential acquirers, and know that you’ll want to be pleasant with the correct folks with a view to get the very best consequence for your self and your buyers. 
Sell on the proper time
Timing the sale is as important as making ready your self for it. 
There are two errors founders usually make when exiting. The first is that they promote when the enterprise is in hassle. This is the worst time for apparent causes. The different mistake is deluding themselves that their previous development will proceed, they usually’ll be capable to maintain constructing with out further assist and infrastructure.  
Fanbytes had been rising extremely quick after we bought —150% income development on common yearly — however I used to be sensible that we couldn’t develop like that eternally on our personal. 
So our focus was on guaranteeing that each the market and the product had reached a wholesome degree and we had been able to obtain strategic assist to get to the following degree of development. 
Celebrate. Celebrate. Celebrate
As entrepreneurs, we are likely to consider in “hustle tradition” — you promote and also you go on to the following factor.
If you’ve constructed one thing vital, it’s seemingly that your staff goes to be working with the acquirer ultimately. It’s subsequently essential that you simply have a good time as a gaggle. Over-index on this. When we bought we had plenty of events as a result of it actually was an important stepping stone for the staff to construct on the following part of their careers.
We are likely to suppose loads about ourselves in the course of the acquisition course of and what we’d get from it,  nevertheless it’s essential to notice that that is additionally a significant milestone for workers, particularly those that have been with you for some time.
You’ll most likely be getting outsized returns in comparison with them, however cash isn’t the one motivator. Prestige, profession growth and affect are all nice motivators for the staff.
Be positive to just remember to have a good time them. They are the actual cause for the enterprise’s success.
A closing notice
I launched Fanbytes after I was 21 at college. At that point, I wasn’t occupied with firm tradition or our folks’s skilled development. I used to be motivated by $$$, and actually, I didn’t suppose this might change.
Fast ahead 5 years, and I used to be rejecting potential acquirers as a result of I felt like their workplace vibe was off!
If you’re within the lucky place of getting your corporation acquired, realise that you simply’re in a really distinctive place and the folks matter. 
It’s vital to take a long-term view of what this implies on your profession, your loved ones and your self. Reading startup press could make it appear to be it is a very regular factor nevertheless it isn’t and it’s one thing I consider it’s best to mentally and tactically get ready for.
It’s the one largest resolution you’ll make in your corporation profession.
Timothy Armoo is founding father of Fanbytes, which was acquired in May. 
Want to listen to extra about Timothy’s story? Catch him on the Sifted Summit in October. 

https://sifted.eu/articles/fanbytes-startup-exit-acquisition/

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About the Author: Amanda