Do you know the five brutal truths about selling your company?
My Rockstar entrepreneur, if you answered “no” you’re not alone. Most entrepreneurs don’t know the five brutal truths about selling your company.
I didn’t know these five brutal truths about selling my company the first time around.
And it should. In every way.
A sophisticated and savvy buyer approached me to buy my EdTech. I started my EdTech right out of school with no money, experience, or team.
The early days of my EdTech had failure as my new BFF. It was my passion to solve a painful problem and grit that kept me in the game to become successful.
Enter the wolf in sheep’s clothing otherwise known as the buyer. A 7-figure offer based on 3 times EBITDA was on the table.
I knew I could do better and said “no.” Saying “no” was the best thing I could have done.
A few years later, I had a 9-figure offer based on 13 times EBITDA from a different buyer.
I embarked upon a journey to master the art and science of selling a company. What I learned shocked me to the core.
There are five brutal truths about selling your company that will take you down unless you know them.
What are these five brutal truths about selling your company?
Sellers Beware, The System Is Set Up Against You
Face it, the system is rigged, and it’s rigged against us. – Eric Alterman
Know that with the brutal truths about selling your company the system is set up against you. In every way.
Is that the great news or the bad news, you ask?
When it comes to selling your company, ignorance is not bliss. What you don’t know either lowers your company value or kill your deal.
Know this and know this well.
Buyers are savvy, sophisticated, and experienced. There are seven classic mistakes sellers make.
Your future buyer hopes and prays that you’ll make every one of them.
Every mistake you make robs you of your hard-earned money and puts it in your buyer’s pocket.
Read and prosper from, “Do You Know The 7 Mistakes Every Buyer Wants You To Make When Selling Your Business?”
While you’re at it, you may also want to check out “Exiting Your Company? Avoid These 5 Costly And Stupid Mistakes.”
Brutal truths about selling your company have you protecting yourself beyond buyers.
Who else, you ask?
Your entire exit team.
Et tu, Brute?
Investment bankers have a big secret they don’t want you to know.
Your exit team sees you riding off into the sunset with your future set and a bank account full of zeroes.
Good on you, but not for your exit team.
What can you do?
Keep reading to find out.
Brutal Truths About Selling Your Company Is Knowing The BFF Of Your Buyer. Your Jaw Will Drop When You Find Out.
Successful sellers know that they don’t know what they don’t know and do something about it. – Jeffrey Feldberg
Brutal truths about selling your company is knowing the best friend of your buyer.
The business of selling a company is big business. With this in mind, know that selling your company is a zero-sum game. Either the buyer wins, or you win.
Millions of dollars are up for grabs. As the seller, the system is set up against you from the start.
Ready to learn an industry secret that buyers don’t want you to know?
The best friend of your future buyer is your investment banker.
Yes, you read that right. Your investment banker and buyer are BFFs.
As talented as you are and as successful as your company is, you’re a one-time transaction.
Like yourself, your investment banker and future buyer are in business to be in business. Both your future buyer and investment banker will do many deals together.
Why does this matter?
If your investment banker was in a position to choose between you and your buyer, you’d lose. All-day. Every day.
How do you protect yourself?
Never force investment bankers to choose between you and the buyer.
There’s one more big thing you can do to level the playing field and even tip it to your advantage.
Keep reading to find out.
Want To Level The Playing Field Or Even Tip It To Your Advantage On Your Exit? Hire A Chief Exit Officer
The key for us, number one, has always been hiring very smart people. – Bill Gates
Brutal truths about selling your company is knowing that the exit team has their agenda.
The members of your exit team are hyper-focused on getting your deal done.
Your investment bankers want to seal the deal to collect their commission and move on to the next exit.
The talented accountants and tax advisor focus on the accuracy of their reports.
Your crafty mergers and acquisition (M&A) lawyer is deep into the agreement details.
That brilliant strategist you hired focuses on the minutia of the exit strategy.
And your management team has their agenda which you’ll learn about later in this article.
Everyone is taking care of business, but it’s their own business.
There’s one major flaw:
Maximizing value and protecting you.
How do you protect yourself when you don’t know what you don’t know?
Enter the Chief Exit Advisor.
How A Chief Exit Advisor Positions You For Ultimate Success When You Know The Brutal Truths About Selling Your Company
The first hire on the exit team of smart sellers is the Chief Exit Advisor.
A Chief Exit Advisor is an individual who has a track record of success is the buying and selling of companies.
Who can be a Chief Exit Advisor?
Look to investment bankers, M&A lawyers, sellers, buyers, and strategists.
When it comes to your Chief Exit Advisor experience trumps titles. All-day. Every day.
What has a Chief Exit Advisor stand out from the rest of the exit team is the loyalty to you.
Your Chief Exit Advisor reports to you and only you. The focus of your Chief Exit Advisor is to have you retire rich and happy by:
- Maximizing your company value
- Protecting you from you
- Neutralizing the many “poison pills” in your exit agreement
- Uncovering the blind spots you never knew you had
- Finding the best talent for your exit team, including your investment banker
- Giving you the “inside scoop” your advisors know but don’t share
- Providing you peace-of-mind throughout the entire process
Expect resisteance and even protests from your board, management team, and investment bankers. You’ll hear that A Chief Exit Advisor will slow things down or even cost you the deal.
Know that these protests are all lies, lies, and more lies.
The best exit team is one with synergy and harmony. Having your Chief Exit Advisor on board first helps you achieve this.
It’s not necessary for your Chief Exit Advisor to be at every meeting. Instead, have your Chief Exit Advisor in the background.
Remember, you have one chance to get it right on your exit. Tilt the playing field in your favor with a Chief Exit Advisor.
Ultra Successful Sellers Do Two Things Nobody Else Does, And So Should You
Dare to be different. Successful people always stand out – Robert Cheeke
If you want to strike fear in the hearts of sellers, mention the two “D” words.
Both due diligence and setting up a data room are time-consuming and expensive. By the way, the two “D” words are also painful.
Read and prosper with, “The Due Diligence Mindset You Need To Win.”
Sellers lower company value by following the advice of their investment banker.
What’s the investment banker advice that lowers your company value?
Allowing investment bankers to perform due diligence and setting up your data room.
When it comes to investment bankers, you’re always guilty and never innocent.
Thorough due diligence finds the skeletons in your company. The damage is already done even when correct the issues.
Brutal truths about selling your company is knowing that perception is everything. The better the perception of you and your company, the higher the value.
Performing your due diligence first allows you to find and correct the issues that arise.
Setting up your data room impresses investment bankers. A lot.
Your investment bankers will migrate your data room to their data room later in the process.
The great news is that you’ve saved time for your investment bankers and are coming in with a clean slate.
Think of it this way.
Imagine you’re showing up for an award dinner in your honor. You’ll choose to show up in formal attire instead of jeans and sneakers to put your best foot forward.
Performing your due diligence and setting up your data room first has you win. All-day. Every day.
You’ll retire richer and happier from a higher company value.
Brutal Truths About Selling Your Company Means Sharing The Pie Or There May Be No Pie At All
Call it what you will, incentives are what get people to work harder – Nikita Khrushchev
Brutal truths about selling your company is understanding that perception is reality.
Your perception is your sacrifice, hardships, and many sleepless nights.
Your grit and your passion had you beat the odds to be successful, and now it’s time to cash in the chips.
While this is your perception, the people around have a different one.
The truth that everyone around you is thinking, but nobody is saying is that you’re about to become rich. Very rich.
Some members of your team may feel it’s not fair that you’re becoming wealthy off their hard work.
Brutal truths about selling your company have you provide an exit incentive.
What’s an exit incentive and who receives it?
To be blunt, money that you pay to two groups when the deal closes.
First, key employees who make a difference in your company and can either make or break the sale.
Figure out what’s a reasonable amount that will have key employees wanting the sale to happen.
The second group is your investment bankers.
Wait a minute, you say, aren’t I already paying my investment bankers?
Yes, you are.
Would you be willing to pay your investment bankers more if they could get you a higher value?
A resounding yes.
Find out the top range in value your investment bankers have calculated. Provide an incentive to pay a bonus for ever dollar over the top-value.
Tilt the odds in your favor by having your team and advisors wanting the sale to help.
After all, a piece of a smaller pie is better than no pie.
When it comes to selling your company, you have one chance to get it right.
What most entrepreneurs don’t realize is that the system, from start to finish, is set up against you.
There are five brutal truths about selling your company. To maximize success and your future wealth, you must know and master these five brutal truths.
How do I know?
I was the kid who started his business, an EdTech, right out of school with no money, experience, or team. The truth is, I had no business being in business.
My grit and passion to solve a painful problem helped my EdTech become successful.
Success attracted attention. I received an unsolicited offer from a wolf in sheep’s clothing. After saying “no” to a 7-figure offer, I committed myself to master the art and sale of selling a company.
What I learned through my two-year journey shocked me.
The skills you mastered to create a successful business won’t help you sell your business. Buyers know this and count on you making mistakes for their benefit.
I spent countless hours and money to uncover the secrets that buyers hide from sellers.
Once I knew how to “play the game,” I had a 9-figure exit based on 13 times EBITDA. Same company, offering, and people.
The great news is that you don’t have to endure the time, frustration, and failures to achieve success. I’ve already done this for you.
You have everything you need to be successful. Right now.
So what are you waiting for?
You can do it. I know you can.
Here’s to you and your success.
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