One of the best times to sell a business is when things are looking up.
Impressive turnover? Profits on the rise? Employees keeping up with the latest training and development? Management and staff morale strong? If you’re answering yes to most of these questions, it might not feel like the natural time to retire from your business or move onto your next venture.
Many of our clients ask us when’s the right time to sell a business and our advice is always to quit while they’re ahead, even when that feels counterintuitive.
The cautionary tale of Rand Fishkin…
Let’s take a look at the story of Rand Fishkin, who started his entrepreneurial journey when he joined his mother’s marketing agency as a partner. Upon realising how much his mother’s customers were struggling to get Google to display their company in a search, Fishkin immersed himself in the emerging field of Search Engine Optimisation (SEO).
He started a blog called SEO Moz, which grew into an SEO consulting and software company. By 2007, Moz was generating revenue of over £650,000 a year, when Fishkin decided to drop the consulting to become solely a software business.
Fishkin’s company saw growth of 100% per year and by 2010, Moz was generating nearly £500,000 revenue each month, which caught the attention of Brian Halligan, co-founder of marketing software giant HubSpot.
HubSpot offered Fishkin over £19 million of cash and HubSpot stock – an offer five times bigger than Moz’s entire revenue in its last complete financial year.
However, Fishkin wasn’t satisfied with the offer. He believed a fast growth Software-as-a-Service (SaaS) company was worth four times future revenue and was confident Moz would hit nearly £8 million by the end of that year. So, he counter-offered, saying he would only be willing to accept around £30 million. HubSpot declined.
“A lot of sadness, a heap of regrets and a smattering of resentment”
Instead of quitting while he was ahead, Fishkin raised a round of venture capital and started to diversify Moz away from the SEO tools he’s had such success with and into a broader set of marketing offerings. However, the further Moz veered away from its core in SEO, the more money the business began to lose…
By 2014 – just a few years since HubSpot’s multi-million pound offer to buy the business – Moz was in full crisis mode. Suffering from depression, Fishkin decided to step down as CEO, describing his resignation as a “lot of sadness, a heap of regrets and a smattering of resentment.”
Fishkin became a minority shareholder in a company he no longer controlled, where the venture capitalists had preferred rights in a liquidity event. His liquid net worth is £615,000 – much of which he says he’ll need to spend on elderly care for his grandparents.
As for HubSpot, it has since gone public on the New York Stock Exchange is worth nearly 20 times as much these days. What’s more, HubSpot’s offer of over £19 million in cash and HubSpot stock would now be worth approximately £77 million (based on the increased value of HubSpot’s stock).
You can read more about Fishkin’s story in his book Lost and Founder: A Painfully Honest Field Guide to the Startup World.
Don’t become another story of missed opportunity
What if an offer was made for your business today? Would you be ready to sell? Would you regret it if you said no?
In our blog Know when you’ve won (and it’s time to sell a business) we help you identify signs that show it’s a good time to exit your company:
- Steady turnover with year on year growth
- Trend-setting and ground-breaking new products, in-demand services and/or a renowned brand with a current and resonant message
- Global appeal – could your business become the leader in another country where the industry is less established and there’s a gap in that overseas market for your offering?
- A happy workforce comprising top experts and new talent with fresh ideas
- Strong staff retention and a reputation for being a rewarding place to work
- You’re as organised and compliant as you are successful – demonstrated by orderly contracts, thorough and consistent financial reporting and protected intellectual property
Entrepreneurs Hub is a friendly corporate finance company that can help you proactively prepare and market your business to the right buyers for sale – or work with you when someone approaches you and asks to buy a business you own.
Let’s value your business, get you exit-ready, and negotiate a deal that will allow you to walk away with maximum value – and no regrets.
Contact us in confidence on +44 (0) 845 067 8678 or email us on [email protected] to find out how we can help you sell a business, with no obligation whatsoever.