While there is a lot of talk in business circles about ‘scaling’ and ‘exiting’ your start up business, it’s difficult to come by accounts of what it is really like to sell your business. When should you do it? How should you prepare for it? How long does it take? Do you need expert assistance? What does the right buyer look like?
We asked 3 incredibly successful, award winning female business owners who’ve recently sold their business to give us their inside tips and advice from their own experience. Thanks to these innovators and industry disrupters for graciously sharing your accumulated wisdom.
Irene Falcone, Nourished Life Founder and CEO launched her online platform that sells sustainable, eco-friendly, and natural personal care, beauty and lifestyle products in 2012 and sold after 5 years.
Mandi Gunsberger founded Babyology, Australia’s largest digital media company for parents in Australia, reaching over 1 million people each month, in 2006 and sold her business after 10 years.
Tina Tower, founded Begin Bright School Readiness and Primary Tutoring Franchise and sold after 8 years.
IRENE FALCONE, Founder & CEO Nourished Life
Irene’s top 3 tips on preparing a business for sale are:
- Have your finances and processes in order,
- Be strict on the type of company you want to be involved in, i.e. culture, fit, location.
- Always make sure it’s more than about the money! Selling a company is a huge thing. You need to do it for the right reasons long term.
MANDI GUNSBERGER, Founder Babyology
There is a lot of advice out there when looking at selling a business and in my experience not all advice is good advice. You’ll meet many people along the way who might be very senior or have long LinkedIn profiles and will have various opinions around what you should be doing with your business; new revenue schemes, going into new markets or pivoting what you are currently doing to increase revenues.
It’s important to remember that no one knows your business, is more passionate about what you are trying to achieve or has more invested than you!
Listen to advice but don’t act on everything you are told. Trust your instincts when it comes to advice and making big changes to your business.
One of the hardest things to do when selling a business is having two very demanding full time roles at once: running the business as usual while keeping revenue and profit up, as well as selling the business. Selling a business can take anywhere from 3 to 12 months so it’s a marathon rather than a sprint.
Creating the right documents and pitch deck to go to market, finding the right advisor, getting in offers, working with lawyers, going through due diligence and then negotiating a very long legal contract is all often out of the realm of the CEO, and can be very overwhelming. I recommend having the right advisor who complements your strengths and weaknesses, to help navigate and understand the process.
When looking at various offers to sell your business, decide what is most important to you. Sometimes it might be the highest price, but it’s also worth considering the earn out period, the commitment on the CEO after the sale, the terms of the payment and a lot more. For examples getting less money paid upfront and only working for 3 months in transition might be better than more money but a 2 year earn out period working full time for your purchaser. Lots to consider!
TINA TOWER, Founder Begin Bright
I started my business 13 years ago and at the beginning, I never had the plan to grow a National franchise network and to exit. It was just me having fun, doing what I loved and seeing children feeling happy, smart and confident. As with everything, the business grows, evolves and adapts over time. I had a small suburban primary tutoring centre and knew that I wanted our Begin Bright program to reach more children and so ultimately that was the reason I decided to scale up and start franchising.
The skill set that I required for a start up and then for an established National franchise were extremely different. I like being creative, experimental, trying exciting new things and being agile. But once a franchise gets over 10 sites, it has to be all about consistency, systems and management. As we reached 30 franchisees, I knew that it was time for me to bring in people who enjoyed that next stage of business.
The first stage of deciding to sell is quite an emotional one. As founders, I think we put so much of heart and soul into the business. It’s not just about the numbers and processes. As a result, we’re usually way more emotionally invested in the business than corporate management and it takes a lot of thinking and planning to work out how to deal with that. A good psychologist and awesome friends come in really handy!
On the practical side, you need a great accountant who can help you to value the business. I still have the theory that a business is only worth what someone is willing to pay for it.
I’ve seen service based businesses sell from anywhere between a 2x profit multiple right up to 17x profit multiple.
For a tech based business at the moment, profit doesn’t even seem to be a necessity for a positive sale (always blows my mind)! But for my experience, we worked off profit multiples.
You’ll need a great lawyer to comb through the contracts with a fine tooth comb. Because emotions are running so high, it’s easy to miss particular things in the fine print. Have someone experienced who can go through that with you and know all the implications of what you’re signing, and look at through the lens of best case and worst case scenario, because a lot will change after you sign on that dotted line.
There’s various ways that people sell businesses and once it gets to a certain size, it’s rare that you will sell and walk away on settlement day. There’s usually a transitionary period or earn out to ensure that the business continues it’s growth without you. For a founder who has had control over every aspect and decision of the business to go to being an employee and not being able to have opinions while they’re in the day to day can be frustrating.
So, I would recommend moving on as quickly as you can, or having some formal decision making ability built into the contract while you remain.
Back to the emotional side, be prepared to go through a roller coaster of them once it’s done. It’s both a celebratory moment and also a really sad one when such a large important part of your life that you’ve no doubt sacrificed heavily for, is ultimately away from you and forever out of your control. You have to say goodbye to the team you worked so closely with, who supported the business, and you’ll need to find a new normal. It’s liberating, scary, exciting, euphoric and heart breaking, all at once.
For me, I know that there are so many things that I want to do in this wild and crazy life journey. And so I know that the building and selling of businesses is going to be a part of that, because I can’t bear the thought of doing the same thing for the rest of my life. People sell businesses for all kinds of reasons and if you’re deciding to sell yours, negotiate well to get your value, leave well and move on to the next adventure!