For many entrepreneurs, the prospect of a buyout offer can be tempting. However, amid the whirlwind of excitement and potential financial gain, it's important not to lose sight of critical factors that can significantly impact the deal. Here, Young Entrepreneur Council members share what they consider the most critical factors to consider before selling your business.
While it's easy to get lost in the excitement, what's one key factor you must consider when another company offers to buy your business, and why?
1. Potential bad actors
Competitors often express an interest in purchasing a business merely to gain as much information about that business as possible with no intent of actually completing the purchase. Be sure to have a solid mutual non-disclosure agreement in place before you share any of your confidential information, and trust your gut before you share too much of your company's secret sauce. —Doug Bend, Bend Law Group, PC
2. Your company's price
The key factor to consider is what price you're willing to sell your company for. Being clear on your price target will help you quickly determine whether you should proceed with going through the expensive and time-consuming process of completing an M&A transaction. —Nanxi Liu, Blaze.tech
3. Implications on your lifestyle
Is your business a “lifestyle” business, built to scale or built to sell? I started with a lifestyle business because I truly love the professional services we offer. After a decade, my focus was on scaling and offering our services to a wider audience. If somebody asked me about buying, I would ask myself what I would do with my time because my work and helping people define a large part of my life. —Givelle Lamano, Oakland DUI Attorneys
4. Your involvement after the sale
Think about how much you want to stay involved after the deal. It's important because your level of involvement can affect the future direction of the business. You need to decide if you want to continue leading the company, have a transitional role, or step away completely. It's all about finding the right balance between letting go and staying connected. —Abhijeet Kaldate, Astra WordPress Theme
5. Your company’s value over time
The most important factor to consider when another company offers to buy your business is an assessment of where your company will be in the next five or 10 years. This will make it easier for you to decide whether or not you should sell your business. The offer given to you may be lucrative, but you'll know the actual worth of your business after you've carefully estimated its true value. —Stephanie Wells, Formidable Forms
6. Maintaining customer relationships
One factor that you must consider when another company offers to buy your business is how to continue maintaining customer relationships. You must have invested your time, effort and money to build a strong customer base, and they might start feeling disconnected if a new company takes over your business. Make sure to talk it out before merging your company with another. —Thomas Griffin, OptinMonster
7. The deal's fine print
Don't forget to read the fine print during the due diligence process. Most deals come with spicy clauses that will impact you personally or your team—like by keeping you aboard for years after the exit or slashing your existing team in half. Openly discuss future goals and commitments on both ends. Don't be surprised if the new direction collides with your vision. —Mario Peshev, Rush
8. The terms of the deal
Make sure you're okay with the terms of this deal and that you are ready to meet the requirements of your buyer. Sometimes, agreeing to sell the business is the first step in a long process, which may include growing your business to a certain ROI and meeting very particular milestones before you can sell. You need to be confident in your ability to achieve it within a certain time frame. —Samuel Thimothy, OneIMS
9. The buyer's motives
Ask the buyer, what's their "why’"? Many sellers focus on the "how much" but ignore the acquirer's motives. Understanding their intentions is paramount. A high valuation feels good, but if their reason for acquisition misaligns with your brand's mission, the legacy you've built could be dismantled or diluted. Ensure the suitor isn't just buying competition or an asset, but is genuinely invested in your brand's future. —Shaun Conrad, Number2 CPA Exam Resources
10. The long-term impact
When considering a buyout offer, it's essential to evaluate the financial terms and cultural fit with the acquiring company. Assess whether their values, mission, and management style align with your company's culture, as a poor fit can lead to post-acquisition challenges. Consider the long-term impact on your brand and customers, ensuring the acquiring company's intentions align with your vision. —Andrew Saladino, Kitchen Cabinet Kings
11. The legal implications
When you're merging your company with another company, make sure that you pay attention to due diligence and legal considerations. This will help you uncover any potential risks or liabilities associated with the acquiring company or the deal itself. You need to engage professionals to conduct due diligence and review contracts to prevent yourself from entering any legal issues. —Andrew Munro, AffiliateWP
12. Determining whether you’re truly ready to leave
The most important thing you must consider before accepting an offer to buy your business is whether you're ready to leave. Dollar signs can be enticing, but moving quickly can make you feel empty or frustrated, especially if you truly feel like your work isn't done. I can't stress enough the importance of talking to your loved ones and seriously thinking it over. —John Turner, SeedProd LLC
