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Rob Follows: Our message to entrepreneurs is you can sell to strategic buyers.
Guest: Rob Follows
Bio in a Tweet: Founder of international M&A company STS Capital, successfully sold previous company to Maritz, completed the Seven Summits (yeah, he summited Mt. Everest!).
Quick Background: Rob successfully sold his company back in the 1990s to a strategic buyer and a few years later, started a mergers and acquisitions company to help other entrepreneurs do the same. In today’s show, Rob discusses how business owners can prepare their company for a sale, present it in the best possible light, and sell it to a strategic buyer who might pay as much as 300% more than a financial buyer.
Key Insights:
Selling to Strategic Buyers
1. When should you sell your business? “Usually, the best time to sell is when the business is growing and has a long curve of growth ahead of it.” In other words, sell when you’re in a position of strength, not reactively when you’re hurting.
2. Financial buyers know they can buy a company for a steal when any of the “6 D’s” are present. So, if at all possible, don’t sell due to death, disease, disability, disenchantment, divorce, or too much debt.
3. By the time financial buyers have made an offer for your business, they’ve already identified strategic buyers they could flip your business to. The point is, skip the financial buyer and sell directly to a strategic for a much higher price.
4. “To sell your business effectively, have strategic buyers fall in love with your business.” Rob shares exactly how to do that in the podcast.
5. Generally speaking, you can interest a strategic buyer once you hit $50 million in revenue. However, recurring revenue businesses leveraged by technology could find immediate interest from strategic buyers at revenue numbers below $50 million.
6. When selling to a strategic, it’s usually up to the entrepreneur if they want to stay on after the sale. Sticking around for a while usually raises the sale price because it reduces the buyer’s risk.
7. To maximize your sales price, start the process one or two years ahead of when you want to sell. Then, work with your coach and I-banker to understand and strengthen the “critical enablers” that will lead a strategic buyer to fall in love with your business.
8. Rob outlines the step-by-step process in working with an I-banker to sell your company. You can also read it in the transcript.
Coaching Takeaways:
1. The best time to sell your business is when it’s growing like crazy. Sell when you can do it from a position of strength, not when you’re forced to through weakness.
2. You can sell your business to a strategic for much bigger $$’s. The key is to plan ahead and work closely with your coach and I-banker to maximize the “critical enablers.”
3. Don’t go it alone when selling your business. Hiring top coaches, bankers, and tax professionals will pay for themselves many times over in the form of a higher sales price and lower taxes paid.
Transcript: Download the full transcript here.
