As entrepreneurs who are thinking of selling, you and your partners should be very clear about why they want to do that.
6 min of reading
Opinions expressed by Businessman The taxpayers are yours.
As CEO of a public company, his work is twofold: guarantee profitability and protect shareholders. This is likely to be one of the main reasons why the Silicon Valley Snowflake Computing board of directors appointed Frank Slootman as new CEO. The former Greylock Partners VC has already released two technology companies, and his appointment as CEO of Snowflake Computing suggests that an IPO could be just around the corner.
That reorganization in the data storage company is another example of why the founders of new companies that are considering selling or even hiring additional shareholders should think carefully about what they are trying to achieve. All entrepreneurs must understand that the objectives of a company will change after an acquisition or sale of a large part of the capital. And when goals change, people change frequently.
Traditionally, it has not been easy for entrepreneurs to maintain the start-up mentality by becoming a more established corporate organization. Many entrepreneurs do not understand that an acquisition means that they are suddenly a small division within the parent organization. That is why it is common for the executive team of the acquired business to leave or be absorbed by the management team of the parent company. On the other hand, 30 per cent Employees perform overlapping functions if both companies involved in an acquisition operate in the same industry. So, layoffs are the logical conclusion.
That said, large organizations are beginning to see the value of bringing business teams to serve as internal disruptors. This was the case when my company, Schmidt & # 39; s Naturals, was acquired by Unilever in 2017. That transition taught me a series of valuable lessons on how entrepreneurs can maximize returns before and after a purchase.
Why stay after a purchase?
I co-founded Schmidt's natural products in 2015, and my highest priority before the acquisition was to make sure that all the stakeholders' objectives were aligned. For any businessman who is thinking of selling, you and your partners should be very clear. why you want to sell You will want to define what your company is trying to achieve through the acquisition and make sure that everyone is on the same page.
Sometimes a founder or CEO needs to leave after an acquisition. That decision is often reduced to one factor: when you built the company, were you doing it to get rich or to solve a problem?
The different founders have different reasons. Some want fame and fortune; some seek enrichment; And others are passionate about changing the world. For founders who have a creative tendency, for example, staying after an acquisition to pursue the goals of a large organization does not align with their personal values.
I ended up serving as CEO of Schmidt & # 39; Naturals after the acquisition of Unilever, and immediately assumed a number of new responsibilities. Instead of building the company, I suddenly found myself supporting a much bigger boat than the one we had originally built. I felt comfortable in that role, but that might not be true for all entrepreneurs.
Related: The case of an advance purchase
Whether you're looking for the same opportunity or not, here are some ways to position your startup to keep the momentum going beyond the initial transaction.
1. Think of your business as a living entity.
When you are building a business, your brand is a living being, it is like a child. Start as a baby, and you have to help him navigate the world. Mature to become a teenager, acquiring his own personality on the road. And then, when you are an adult, your business will be ready to make an impact on the world, with or without you. Your health is ultimately measured by the cash flow: the profit is the blood that flows into the business and the loss is the blood that comes out.
Just like raising children, managing a business involves making mistakes, learning from them and looking for patterns that can help you adapt for the future. "Patronicity"A term coined by the writer Michael Shermer is defined as the ability to discover patterns in a chaotic and noisy world, and your business will face many challenges as it grows." By filtering the noise and focusing on what works, you will be in the good way to "raise" a successful company.
2. Have an exit strategy, but do not be afraid to turn.
Many founders and creatives have an exit strategy that consists of taking advantage of their idea. Others consider themselves visionaries and want to share a product they believe in with a world they believe needs it.
Calculate your long-term plan as soon as possible. As you grow, make sure that all stakeholders, including management and investors, agree to that plan. The sooner you define it, the more likely you are to succeed. The entrepreneurs who wrote a plan in the early stages of creating their businesses were almost 10 percent more likely to succeed, according to a study Harvard Business Review.
Inevitably, you will find new opportunities, new threats to your business or new market needs that could give you a reason to change course. My original plan for my company was to issue an IPO, but building the infrastructure for that would have taken me a decade. I was fortunate to connect with Unilever because the acquisition allowed me to take my company to the next level in a fraction of the time it would have taken if I had limited myself to my original vision.
3. Play the long game.
This advice is applicable regardless of how big or small your company is. It is possible that your team is just you and some others at this time, but it could increase to hundreds or even thousands of employees and millions of customers. Stay focused on long-term success at each stage.
Amazon started with Jeff Bezos selling books online. It does not become much simpler than that. Since then, the company has evolved quite a bit from that original structure, and now it serves an amazing number of buyers around the world with sales in the first quarter of almost $ 60 billion.
The bigger it gets, of course, the harder it is to maintain growth. As the third most valuable corporation in the world, Amazon is massive and continues to grow. Bezos has been forced to spend a lot to ensure that the company remains an important player in everything from artificial intelligence and smart home technology to cloud computing.
None of these investments will pay off tomorrow. In truth, some may never be worth it. But this focus on the long game is the reason why Amazon has been so successful. Ultimately, that kind of long-term vision will help you achieve success, no matter how you define it.