Tuck Advisors is an investment bank that helps founders, like you, sell their companies.
The number one axiom in M&A: Time Kills Deals.
-
Be on accrual basis accounting, not cash. 99% of the time, the company that buys yours will be on an accrual basis, and that’s the way they will want to view your financials.
-
When starting your company, set yourself up for a QSBS election to avoid paying taxes when you sell. Info here.
-
Establish a Board of Directors with quarterly meetings, even if it is only a formality.
-
Make sure all employees and contractors sign NDAs and assignability of IP/work agreements.
-
Have P&L statements for prior years (up to 5 years), a forecast for the rest of this year and next year (that you are willing to stand behind), and a Balance Sheet ready to go.
-
Make sure your Cap Table is up to date.
-
Keep your Organization Chart current.
-
Have an annual Quality of Earnings prepared by a reputable firm — the Buyer will have their own Q of E done, but, by you having one done preemptively, it will point out any issues upfront and speed the process along.
-
Have a team of advisors ready to act, including an M&A advisor, an M&A lawyer, an M&A tax advisor, and an M&A CFO (who can advise on a Net Working Capital peg).
-
Be clear on how the business will run post transaction. Will you, the Founder/CEO, stay on or is there someone else in your organization (COO/President) who can run it if the new owner needs someone to stay in place?
P.S. Revenue growth and profit margin/growth are both important. In general, growth rate is more important for earlier-stage companies and profit for later-stage companies. Selling a company that is still losing money is a lot harder than selling a company that is making money.