Understanding how much your business is worth is definitely important. Valuation is a key financial indicator throughout the life of a business, but particularly during fundraising rounds or a potential M&A deal. However, too many companies obsess over valuation as if it is the ONLY deal term that matters, and this simply is not the case. Here are other financial aspects of a deal that can be just as important and must be taken into consideration:
Innovation and intellectual property (IP) underpin the success of startups the world over. These days it seems like record numbers of individuals embrace the entrepreneurial spirit and are willing to risk everything that they have to see their dreams come to fruition. Unfortunately, for every company that thrives, there are at least ten others (probably hundreds) that fail for all sorts of reasons. One of these reasons relates to a company’s failure to utilize dollars wisely and/or protect important assets, especially unique IP. Here are common mistakes entrepreneurs make when it comes to IP and ways to avoid them:
Most of us are familiar with the steps involved in setting up a new online account, whether for email, shopping, or other purposes. It usually requires the selection of a unique username as well as a password. In some instances, the password must meet certain criteria, such as a specified character length as well as the inclusion of uppercase and lowercase letters, numbers, and a special symbol. In general, people are advised not to select passwords based on their names, pets’ names, or other personal information that would be fairly easy for others to figure out. For professional accounts, in particular, it is heavily frowned upon to select a password with personal meaning. However, despite a company’s request that its employees create passwords that will not be compromised easily, personally relevant words are almost always the type of passwords that people choose.
So, a prospective buyer has shown interest in your business, and you've decided to entertain the idea of a acquisition. First of all, congratulations; this is an exciting prospect for both companies involved! At the same time, with any business acquisition, it's important to realize just how long and involved of a process this can be.
Even though you may have received interest around the purchase of your company, it's important to realize that this is only the beginning. From here, the company looking to purchase your business will need to go through the complex due diligence process, wherein a team of accountants, lawyers, and other business acquisition professionals carefully examine every facet of your business to ensure that they're making a sound investment.
All told, the entire process can easily take anywhere from three to six months. As such, it's a good idea for you to prepare yourself for what's to come. By gaining a thorough understanding of what to expect from the due diligence process, you'll have a better understanding of what to expect and how to handle the entire situation properly so that, in the end, everybody can come out ahead.
Non-disclosure agreements (NDAs), sometimes referred to as confidentiality agreements, are crucial instruments for companies with valuable intellectual property (IP) or other types of sensitive data. Sometimes the core principles of these agreements are integrated into an employment contract or appended to a non-compete. Irrespective of whether the terms are incorporated into a larger agreement or outlined in an independent instrument, there are some specific matters that must be addressed. Obviously, any agreement should identify the parties who are bound by the terms contained within the particular document, and NDAs, in particular, must make this abundantly clear. Here are the other key provisions that must be included: