For startup founders, once a business is on a roll, it can become increasingly difficult to balance upward success. On the one hand, you want your company to grow and do well, but there are understandable concerns that larger, better funded competitors will swoop in and pull the rug out from under you. They may do this by delivering the same product or service in a bigger and better fashion, or they may come directly for your business and seek to acquire you before you are actually ready. There may not be a perfect time to submit to an acquisition, but there are definitely some telltale signs in the business life cycle that help suggest when the time is right. Here are some things to consider when deciding if it is the right time for your startup to be acquired.
You need capital that is hard to find or obtain
Money is almost always the strongest driver behind the decision to sell your company. In some cases, startups decide to sell because they have achieved a value they are comfortable with and know that they will get a price they want. But, it is also incredibly common for startups to allow a larger enterprise to acquire them because of capital needs or concerns. For some companies, there often comes a point when more money and resources are needed in order to make significant changes, and selling just may be the best option.
You are changing and expanding faster than the existing team can manage
Even if securing capital is not an issue, some startups grow and expand so fast, requiring sophisticated technology or expert management teams. Granted, with the right budget it may be possible to bring on the kind of talent needed to handle these things. However, it very well may make more sense to allow the startup to be absorbed by a similar business or one that has the capability to incorporate a company's existing offerings into its infrastructure.
Your company would be more valuable and capable of faster growth under different leadership
One of the keys to success in business, and in most things in life, is recognizing what you know, but perhaps more importantly, acknowledging that which you do not know and seeking help or advice accordingly. It may not matter how well funded your business is, how strong your leadership team is, or how dedicated your employees are. There simply may come a time when the business will fare better under different leadership, and recognizing when that becomes a reality likely signifies it is time to sell.
You are ready to hand over the reins
For some startup founders, deciding to sell is a difficult and emotion-laden decision. People are proud of their creations and want to ensure that the product of their hard work will continue to be nurtured. Of course, plenty of acquisitions occur because of companies’ desires to subjugate their competition, as opposed to fostering their potential growth. Nonetheless, some business owners may find that they reach a point where they are simply ready to move on for whatever reasons and regardless of the outcome. If your team has lost its drive or merely desires to seek opportunities elsewhere, it may be best to bow out gracefully.