Most entrepreneurs want establish their start-up and then sell it. But potential buyers will want to assess the odds of sustaining the business without you, and growing it in the future. So you can improve your chances of being acquired if you work towards making it obvious to potential buyers that this is the case. In general, this means creating a unique business that is easy to run, and has a stable customer base, and strong financials.
Here are a few questions that will help you determine where your business stands.
How replicable is your business model?
Will it be easy, or less expensive, for the potential buyer to build their own business from scratch instead of buying yours? The less replicable your business is (meaning hard-to-duplicate products and services, top-notch team, secure market access, etc.), the better.
Will it be easy to run your business post-acquisition?
What this really means is that there less risk if a new owner is confident they can run your business without you. Are there systems in place so your day-to-day operations chug along smoothly? Are employees trained to handle important issues that might arise? Will your customers continue to buy if you aren’t there?
Has your business performed well financially?
Buyers will obviously conduct a thorough review of your business’ financial performance, and will want to see growing revenues and profits. Even if much the value of a tech start-up is intellectual property, a buyer will still want to see sales so that they can be confident that the market had accepted your value proposition.
Is your customer base stable?
Customers are the lifeblood of any business. The most important question is how many customers will leave after acquisition? 50%, 25%, 10%, or none? The answer to this question might be found in historical industry behaviour, so look at what happened to other businesses similar to yours after they were purchased. Having signed contracts with customers for long-term supply arrangements is great, since it means they will continue to buy. You can also demonstrate a high level of customer satisfaction — which means you’ll have to measure it and resolve any challenges – since satisfied customers will likely come back.