It’s the ultimate goal for many startups; build a company and have it acquired in a few years, locking in a nice, tidy exit; but how do you actually prepare your business so that this can happen?
There are a few things you should be doing from pretty early on with your startup, says Paul Gooley; a partner at Grant Thornton, who specialises in acquisitions and mergers.
You need to make sure your strategy is focussed on building a company that is not only profitable, but can add value to a potential buyer.
It’s worth thinking about the following when you start to grow the business:
- Who are potential buyers? First step, says Gooley, is to know who the potential buyers are, thinking even 2-3 years ahead. Find out who is buying businesses in your sector by reading trade magazines, keeping abreast of industry blogs and joining the right associations;
- What do they want? Determine what these companies will be looking for. What’s your competitive advantage? What should it be? It’s worth making a list of these key value drivers;
- What does your business do really well? Spending your energy doing one thing really well, is better than doing an average job of a few things. Work out where your business can specialise and make that your focus;
- Take care of the detail. There are a bunch of things that will need to happen if you find a buyer. This can include everything from having accounts audited, through to contracts secured and appropriate management structures in place. Gooley says you never know when an offer may come, so having all the pieces in place is smart business.
Gooley says he does a lot of work with businesses preparing for a potential exit. Branding is important too, as your image can determine the way potential buyers will perceive your startup. Using PR can help, as can joining associations and networking with competitiors.
“Sometimes they’re the most likely acquirers,” says Gooley.
You need to take risks too, in order to scale and take a strong market share, says Gooley.
“It’s still a big risk to raise investment. But if you don’t take risk, the market position will probably shift. There’s a stage where you need to commercialise the business.”