What's better than an entrepreneur who gets to sell his or her business to a big company—often earning millions for his or her shareholders and becoming independently wealthy overnight? The media clamors for these stories, wondering what the next Instagram is going to be, with a fat billion-dollar payout. As business owners, we know it's not typical, and quite rare to have such a booming overnight success, yet it's also possible; and many of us hold on tight to that dream.
So, I wondered, what does it take to make your company one of those that succeeds on such a grand scale? How do you know when it's the right time to sell, and how do you decide who should buy your business?
When It's Time to Sell
“When an entrepreneur tells me they are building a business to sell, I usually tell them they're not putting their energy in the right place," Straus says. "I tell them not to think about selling their company or going public, but to focus on creating value for their customers. If they create enough value for their customers, they'll have many opportunities for their company. Far too often, young entrepreneurs are focused on the sale or the IPO—what they believe to be their 'end result'—rather than focusing on customers and the product. While it’s expected for entrepreneurs to have vision into all those possibilities, the only real way to prepare for them is not to focus on them, but focus on the customer.”
This might be a big reason as to why many companies fail: They’re looking for the IPO and not at their customers. Knowing when to sell isn’t the big problem; it’s creating enough value for the customers—that can be the hard part.
It's not just whether your company is ready to be sold, but whether you're ready to sell your company, and whether you know who you want to sell it to.
"Who is the right buyer for your customer and your product? I personally put that question above all others, because if that question is aligned with what you want to accomplish, everything else has the chance to fall into place," Straus says. "Then, once you’ve identified the right buyer for your customer, you can think about the right buyer for you and your team. Think about how you want to be treated once you give up control of your company and what it would cost to give up such control."
Straus emphasizes the importance of detaching yourself, mentally, from the outcome. "Throughout the negotiation, it’s important not to be attached to the outcome. If you’re too attached to it, you’ll give something up too quickly or hold onto something for the wrong reason. Stay focused on value for your customer and what the end result should look and feel like for you. In my opinion, that’s how you keep your mental strength around the process."
The End Game
The media might have us think that selling a company is all glitz and glamour. But, says Straus: "There were aspects to the sale which played out far better than I imagined and other aspects which did not. Ultimately it was a wonderful opportunity for our customers and for our shareholders and the team that had built the company. I am grateful for the experience and had a tremendous amount of fun along the way.
"When we embrace what we love to do, because we are passionate about it, because our inner compass drives us toward it, because we believe in it, then success comes as a result," he adds. "The focus cannot be on the big pay day—if it is, the pay day will most likely not come. The focus always needs to be around value creation within your company. The pay day is a result of that."
The big sale is only a byproduct of the success. The success often happens first. And your passion can drive that success.
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This article was originally published on August 29, 2014.