Small business owners and those who run startups know the struggles of starting a fruitful business. It can be a long road with many ups and downs. However, if you’re passionate about what you do and you are determined to succeed, then your business may stand a fighting chance. Building a business from scratch is no easy feat; but if you’ve created something that others really love, you may be ready to look into getting your business acquired.
What is a business acquisition?
A business acquisition is defined as “the process of acquiring a company to build on strengths or weaknesses of the acquiring company. A merger is similar to an acquisition but refers more strictly to combining all of the interests of both companies into a stronger single company.”
Some huge acquisition examples include Google acquiring YouTube, Motorola, and Waze. Another big social media acquisition happened in 2012 when Facebook acquired Instagram for $1 billion. Businesses are always looking for opportunities to get ahead and spread their influence.
If you’re an entrepreneur who is ready to negotiate an acquisition, check out the six tips below. It may not be an easy road to get your business acquired, but it can prove to be quite lucrative. If you’re determined, you may be able to negotiate the perfect deal.
1. Preparation is Key
Many acquisitions rarely go as planned and that is largely due to poor planning. Startup founders may find themselves too eager to get acquired– that eagerness paired with a lack of experience can lead to failure. This is where preparation comes in handy. Start to think about your investors, employees, and customers; how will an acquisition affect each of these groups? What can you do to make this potential transition go as smoothly as possible? Do your due diligence and research what similar companies have done in your position– you can learn from both their mistakes and successes.
2. Hire Talented Staff Many large businesses look to acquire startups and small businesses for their talented staff. If you want to display the value of your company, there’s no better way than through the folks who work for you. If bright, talented people are contributing to the success of your small business, other bigger businesses will certainly take notice. Oftentimes, staff will stay with a business during and after an acquisition– the company that acquires your business will not only gain your product or services, but your talented staff as well.
3. Identify Your Weaknesses No person or business is perfect– we all have our flaws! The important point here is to make note of your weaknesses and identify where your business has room for growth. Once you understand what prospective buyers are looking for, you can work to eliminate these weaknesses. By doing this, you can focus on growing more high-value factors that are important to the highest-paying buyer. If you know where your business falls short, it will be easier for a larger business to see how they can fit into an acquisition with you. There’s no point in trying to pretend your business has strengths that it doesn’t; everything will come to light eventually, so it’s best to be honest from the start.
4. Make Sure You’re Focused Running a small business is challenging enough, let alone preparing to get your business acquired. Stay focused and keep organised– at all times! Be sure all of your documents are in order and that you know all the ins and outs of your business. Larger businesses who may want to acquire your business will have plenty of questions for you– stay focused and you’ll be fine!
5. Keep Costs Low The more efficient and concentrated your expenses are, the more credibility you will have with potential acquirers. The amount you have at the end of every year to invest in the company’s future is a key aspect that acquirers will look for. Money spent on lavish entertainment or ultra-modern office spaces is money not spent trying to get ahead of your competitors. Larger businesses will want to see that you know how to handle your expenses. By keeping costs low, acquirers will have a clear vision of your priorities, and they will have more confidence in the ultimate success of your business.
6.Have a Clear Vision It’s vital to have a clear vision of what you’d like for the future of your company– even after it gets acquired. Chances are you will remain working with the organization in some capacity after the acquisition; even if you don’t, some of your current employees will be. If your vision doesn’t match up with the business that is acquiring yours, your employees could be in for a rude awakening.
With a bit of planning and following through on the above six steps, you’ll be in a better position to have your business acquired. While the valuation of your business is an important aspect, don’t lose sight of why you started your business in the first place. You don’t want your business to lose its integrity due to an acquisition. Keep an open line of communication and expectations with potential buyers and you’ll be good to go!