Print Posted on 03/24/2017 in Business Selling

Comparing Choices for Selling a Start-up Company

Comparing Choices for Selling a Start-up Company

Start-up companies are usually set up by individuals who represent innovative ideas that are fraught with danger in the real world. If you are also among those who love investing in start-ups, you may know that you cannot continue supporting every start-up through your personal finances. There are times, when you just have to sell a start-up and move on to newer, greener pastures.

Here, we describe the most important elements of the available choices, when selling a start-up business venture.

Your Priorities

The first parameter for comparing the choices that are available to you is to establish a set of your priorities. You need to understand if you are looking for a particular price, or if you will only sell your business if you are able to find an individual owner. Some people may only want to sell to a corporate business entity.

The best way to go about it is to create a weighted matrix of your priorities. This matrix may include the potential buying price, the nature of the buyer and the way ownership needs to be transferred. You should give marks to each individual owner and find how they rank in terms of the priorities that you have already set for selling your business venture.

Value of Business Offers

Another thing to compare is the value of each business offer. A buying offer can vary in terms of different items. The new owner may offer you business partnership and provide the additional resources that you are actually looking for. This means that there are numerous types of company offers.

You should always aim to perform a comparison that ensures that every offer is analysed on equal grounds. If you are selling a start-up, then you need to make sure that you have selected the best available offer. You should always ensure that there is no catch attached to offers that look too good to be true. The catch here, may be in terms of transferring patents and similar intangible components of a business venture that may actually belong to you personally.

Types of Ownership Models

Another factor is the type of ownership model on offer. It is important to review how the new owner wants to run a business, because most of the time, the current owners are also working in multiple capacities in a start-up. You may want to retain your position as a director, even when selling the rights to your business. You can mention these requirements when obtaining offers from the prospective investors and should give weightage to the ownership models that reflect the working of your organisation.

The Minute Details

You need to also consider minute details when comparing choices that are close to each other, in terms of their monetary value. This means that you should look at where the offer came from and the additional fee that you may have to bear, such as for arranging the legal documentation which is required when the business ownership changes hands.

The minute details can also include the prospective owner, asking for your suggestions in order to expand your start-up into a new business venture. It may also include the requirements for staffing and other such organisational needs.

Comparing the Different Methods

There are a number of ways for selling your business venture. It is important to understand how each of them work as you will then be able to assess the individual offers in the best possible way. Here are a few of the common business ownership models, which are in use in the start-up business industry.

Sell through Business Acquisition

The most preferred method for selling a start-up is by letting it go through a business acquisition deal. An acquisition takes place when you allow another company to buy your business either with stocks or by offering you direct compensation in the form of liquid assets. You may accept cash for such a transition, or agree on receiving other forms of liquidity, such as the stocks of another company.

You should always remember that it is not necessary for the new business group to keep your current employees, and therefore, you should communicate this fact properly to your management team. According to the available research, most new owners bring their own team in order to change the way the business is managed.

Management Buyout

Sometimes, you may only want to get out of being an owner in a start-up, while you are happy with the way the business model is running. In such cases, you should look no further than actually giving the ownership away to your own management. The business equity can be established in terms of acquiring loans from different financial institutions and you may choose to only work in a management capacity. This is often an essential option that you must exercise if you do not have enough financial resources for expanding a company.

Personal Preference

When all is said and done, you should always make a final choice to sell a start-up according to your gut instinct. This feeling should be supported by the available evidence, but should include a review of the intangible components with regard to selling a start-up business.

Eliminating Poor Biases

When you give weight to personal preferences, your bias may sometimes produce a decision that may not be the top option for selling a start-up company. You can always eliminate undue bias by taking the help of other industry professionals. You can take the advice of your colleagues or professional appraisal companies in order to ensure that you have selected a choice which safeguards your interest as the current owner.

You can always use the internet to find the best buyers, when looking to sell a start-up company. You can join Business Trade Centre if you love selling start-ups to investors who are willing to expand on innovating business ideas. We can certainly help you find the right individuals and companies who will gladly take a company off your hands.

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