When you are starting a business as an entrepreneur, you don’t really give a whole lot of thought to your exit strategy, let alone selling your business. You are too excited with the challenge of building a great company. You’re finally living the dream!
Your new company becomes your child in a sense. And, let’s face it, you typically spend every waking hour taking care of it. (If you’re like me, you dream about it too. It’s 24/7.) You forgo sleep whether intended or not. But, you know that all the sacrifices will be worth it.
When your child is born, you don’t immediately start thinking about the day he/she moves out. However, when you start a business, you need to plan your exit strategy from the very beginning. Let’s face reality here. Most of us won’t have an IPO in our future. The more likely scenario is a sale or merger.
2004 was a year I had two “kids”. My son was born in May, and Network Logix was reborn in September that year. So, for me, the “child” metaphor takes on double meaning as I write this post.
Your child soon learns to walk and then to run. It falls down and gets banged up. Welcome to life kid. Your “child” goes through all of life’s growing pains, and you continue to worry 24/7 like a normal “parent”. But, you know that all the time, effort and energy will be worth it.
Soon the day comes for your kid to leave home. In this case, the day came for me to sell my business. That day came on June 30, 2014.
This was a bittersweet day for me. Every waking (and sleeping) moment over the last 10 years spent thinking about my IT company had finally come to end. It was an extremely emotional time. But, I didn’t have much time to think about it. I now had more work to do in order to make the transition smooth for our clients. No rest for the weary!
As I’ve done with the other 6 posts in this series, I’d briefly like to share what I learned. It is my hope that this information can help at least one person learn from the good and to avoid some of the pitfalls I found along the way.
My Takeaways From Selling My Business
They say that, “Hindsight is always 20/20.” I agree with that for the most part. Things that you learn after the fact should have been obvious all along, yet they are not always apparent when you are in the heat of the moment. Here are the top 3 things I learned from going through the process of selling the business.
- Build your valuation early. This is always the sticky part of getting a deal done. What is your company really worth? The short answer; your company is worth what someone is willing to pay for it. The core “Asset” of an MSP (Managed Service Provider) is the quality of MRR (Monthly Recurring Revenue) and client relationships. Fortunately, we started as a pure-play MSP in 2004, and MRR was built in from the beginning. We did very little break-fix work, and most of our clients were with us for nearly the whole decade. Having Raving Fans is a huge asset.
- Have your books and records in order. I’m not an accountant, nor do I pretend to be one. (I didn’t stay at a Holiday Inn Express last night) All revenue and expenses should be clearly broken out by service type. Solid, long-term agreements with clients proves very helpful. Make sure they are assignable too. Non-solicitation and non-disclosure agreements with employees are also key.
- Hire A Broker. When it’s time to sell, find a business broker to help you. (I’m throwing this in as a hindsight lesson.) Having a professional broker will help eliminate any personal feelings and miscommunications, and reserve it for what it is, a business transaction. Selling your business is an emotional thing. Remember, it’s your baby. Emotion can cloud your judgement, so let a broker do his thing.
If you base success on a single event as an entrepreneur, you will be disappointed. As I look back, I have found that the most joy I derive from the last 10 years has been the journey. The journey of building, creating, learning. It was a wild ride, and I still have a few war wounds, but it was worth it.
As always, I welcome any thoughts or comments below. If you found it useful, please share with a friend or colleague. Until next time….