While there have been some wild Silicon Valley valuations and sales in recent years, things are not always so easy or lucrative on planet earth. For anyone looking to buy a startup they need to be assured they are buying something of value.
This means an entity that can show a solid track record, since inception, of growth and success. In most cases it is easier for all if the founder(s) can be removed from the business, when it is sold, without this a having any substantial negative effect.
There have been some notable success stories in the past where founders have sold out for large sums and then stayed on to become employees in a larger entity. However, this seldom lasts for too long and for the majority this situation is not ideal for either party.
This means that, from a fairly early stage, a professional management structure needs to be put in place to ensure the business can run without the founder being involved.
If you are just starting out with a new business having a clear idea of how you will exit will help you greatly in defining how the business is structured and organised.
If the objective is to sell the business at some point you have to define what the thing you are going to sell will look like.
You will no longer be there to run things, so you had better make sure the business can run without you. It is much easier to build this type of business from the bottom than trying to re-create the business you need closer to the sale.
This is business planning stuff. You need to define some objectives in terms of:
- turnover
- profitability
- market share
- total employees
- assets
- premises
- management structure
This gives you the end targets to aim for.
The one most difficult to envisage for most is management structure. Often in practice this tends to be fluid and dictated by personnel. The mistake many make is to fall back too quickly on a traditional pyramid shaped hierarchy with the boss at the top with other directors, then middle management then production or service personnel.
This structure may prove to be too rigid and unresponsive in the 21st century. Consider a more fluid project or multi-disciplined approach that may serve you better as the business grows.
While thinking about this, consider the best and most saleable structure. Will a buyer want to buy a rigid structured business or one 100% controlled by you, or will a more responsive agile structure be better with you providing strategic guidance?
Sometimes the market dictates what the answer will be, but a startup has the opportunity to be highly innovative and to take another approach. The answer should not be what others do, but what you think will work best in terms of efficiency, quality of delivery, ability to grow and profitability.
