For most entrepreneurs, nothing is more satisfying than seeing their small startup become a successful, thriving business. And that success doesn't go unnoticed for long. Competitive brands and private equity groups are always on the lookout for new and established businesses with positive growth potential. In these cases, it doesn't take long for an attractive M&A offer to be made.As a business owner, these offers can be both flattering and hard to pass up. But how do you know if it's the right time to entertain a merger or acquisition offer? Here are four questions to ask yourself when considering inbound M&A solicitation.
What is your Company Worth?
Regardless of how you feel about the valuation of your business, "worth" is a subjective term. Before you develop any preconceived notions about how much you'd be willing to sell your business for, it's wise to seek the advice of an outside authority.
Investment bankers, CPA firms, and business brokers are a great resource to use when discovering the real market value of your business. As a neutral party, they give you an unbiased valuation of what you should expect to receive from inbound M&A offers.
It's also important to think about the short- and long-term projections of your business. While an acquisition offer may seem attractive today, new valuations can dwarf it two or three years down the road. Either way, it's important not to sell yourself short. Instead, take the time to get a better understanding of what you're business is really worth now and in the near future.
Are you Interested in Selling?
Deciding on whether you're ready to sell or not is a question that most business owners struggle with. The fact is, every business opportunity has its own potential risks and rewards, but these can only be measured if you're willing to let go of control of the company.
Regardless of where you stand today, it's wise for every business owner to consider an exit strategy. Whether by choice or financial necessity, you never want to be forced to accept inbound M&A offers before considering all your options. By setting long-term business goals you'd like to achieve before considering a buyout, you'll know if it's the right time to take an M&A offer seriously.
What is your Desired Business Role Post-Sale?
Prior to entertaining an M&A offer, you should define your post-sale expectations. Do you see yourself completely walking away from the business? Perhaps you would prefer a long-term transition out of your role? Either way, your answers to these questions will help you decide what type of buyers you're interested in dealing with.