Why And When Should You Sell Your Startup?

A startup that succeeds in making its place in the economic market is generally seen as a source of pride for the creator of the company. It is often about a project which seemed ambitious and which was nevertheless crowned with success thanks to the motivation and the talent of the startupper. But once the startup has reached its full potential and is generating significant revenue, what's the next step?

Even if the question of the sale of the startup is rarely considered by the startupper when setting up his business, the fact remains that this subject will quickly come back to the heart of the discussions when the company will generate significant profits.

Why sell your startup? When is the best time to sell your business? What are the steps to follow to sell your startup? Here are the main elements to know about one of the last stages of the startup's evolution as such.

Why sell your startup?

There's no doubt that while we think to put our businesses for sale, it can be confusing in the mind of a startupper at times. In fact, generally, when you want to sell your business, it is when it begins to experience financial difficulties. The entrepreneur then wants to save what needs to be saved by entrusting it to another manager with more capital or more expertise.

But concerning the very specific case of the startup, this form of company is generally the object of a sale when, on the contrary, it has achieved all its objectives. It has therefore become a successful company that has stabilized its business model. But then, why sell it?

One of the main reasons for selling your startup is that it - as its name suggests - was created in this form to test a business idea and adapt its business model if necessary. This "young growth" once well established in the economic market is therefore intended to grow and become a larger company.

But to move from the start-up stage to a company gaining more and more international market share, it is often necessary to considerably increase basic investments. In addition, the startup can no longer be managed solely by the team of collaborators at the origin of its creation. It will have to be steered by several organizations specializing in the economic, marketing, legal, tax, accounting, etc. fields.

Therefore, to let your startup develop further and no longer be considered a novice in the industry, it is often essential to sell it to a buyer with the necessary capital and expertise.

When is the best time to sell your business?

The sale of a business is always a major issue for its manager and his associates. Indeed, the objective here is to resell the startup at the best price. The idea is not to sell the goose that lays the golden eggs at a ridiculous price that will not recover the investment, both financial and human, which allowed the startup to develop.

But as with many decisions about running a business, the timing is often tight. Selling your startup too early is not a good idea. As long as the company has not reached its full economic potential as a startup, it is better for the start-up to continue to manage it and make it prosper. A company that has not yet validated its business model and that can still make improvements to its product or service offering will be greatly devalued by potential buyers. The latter will not hesitate to advance the argument that the economic success of the startup is not yet certain at this stage.

But then: when is the best time? The answer to this question is often difficult to define for startuppers. But a good indicator allows you to confirm your decision-making. The spontaneous proposal of one or more buyers interested in the startup's development possibilities is a good indicator of its value and maturity in the market. Some startup creators and managers have also understood the opportunity to sell their startup when a buyer comes to contact them with an offer to purchase comprising a relatively large amount.

If no buyer appears spontaneously, it is advisable to refer to the various accounting documents produced in recent months. When turnover begins to stagnate and development prospects are limited - for lack of sufficient capital - a startupper has every interest in looking more concretely into the possibility of selling his startup. He will thus be able to take advantage of the selling price of his startup to materialize a new startup project or any other professional project.