Five lessons from eight-figure output

The image of a successful founder is often the one that rings the bell during an IPO. So it’s easy to forget that the majority of successful releases are private acquisitions. After selling my influencer business Fanbytes to global digital marketing agency Brainlabs for an eight-figure sum last May, I am one of many to fall into this category.

Founders need to be realistic with themselves; the odds of building a billion dollar business are slim. Your odds of building a billion dollar business are even lower and make it public. However, building a business that sells tens of millions of dollars is very realistic – with the right team, hard work and market timing. There’s more than one game when it comes to entrepreneurship and more than one measure of success for you and your team.

Here’s what we’ve learned to best prepare you for a successful outing.

Tell a story of organic growth and untapped potential

The main reason a business is acquired is that the buyer thinks the business may be worth a lot more. It’s the story they want to hear, and as a business that has generated real revenue, it wasn’t a difficult story for me to tell. If you’re a seed or Series A company, chances are you also have a good story about your growth potential.

We have clearly traced our growth story. We presented the reason why we could be attractive for this acquirer: 40% of our revenues came from the United States, but we had no physical presence in the United States. Brainlabs is present in the United States. And we laid out the macro reasons why we would continue to be a compelling company: as influencer marketing matured, it was clearly becoming part of the larger marketing mix. We positioned ourselves as the missing piece of big agencies, which we really believed.

If you are currently building, you will find this process easy. You probably have a wish list of 10 or more goals that you don’t have enough time or funding to tackle. Look at this list from your potential buyer’s perspective and come up with the two or three most exciting stories.

Remember that an acquisition is about ensuring that both parties benefit from the transaction. It is therefore important that you can think about this value from the start.

Don’t forget your data room

Suppose your business can be acquired at any time and get your data room in order. A data room is where you store all the information about your business, from legal information to finances, contracts and people information…everything. This is what lawyers, M&A bankers and corporate development look for in due diligence.

You don’t want to scramble to get your house in order when the letter of intent – ​​a preliminary commitment from a buyer – arrives. When we were selling Fanbytes, a lot of the stress came from our lack of a full data room. We were helped by excellent lawyers who took care of it, but we would have saved time and unnecessary stress if we had maintained a data room sooner.

If you know your data processes are poor or don’t exist at all, you’re racking up debt that’s hard to pay off.

“If you know your processes around data are poor or don’t exist at all, you’re racking up debt that’s a pain to pay off”

This kind of rigor is the first thing to drop when product launches, crises or holidays monopolize the time. Do yourself a favor and hire an auditor on an annual basis as soon as possible.

Avoid channel addiction as soon as possible

Buyers are looking for potential risks to your business, and you need to cover your bases. This isn’t from a malicious position, it’s just good business sense. Channel addiction is a prime example of something that could be discredited.

Most tech startups focus primarily on one channel: paid media and performance marketing. When you start with an idea, messy code, and not much else, that’s always the most effective strategy!

However, this quickly becomes a bad look. Ultimately, if you haven’t demonstrated that you can acquire customers in at least three channels, your value may be diminished. What if your competitors had highlighted you by succeeding in a multi-channel customer acquisition strategy? Very bad look.

At Fanbytes, we’ve used content marketing, sales, performance media, and public relations, to name a few. We didn’t need each channel to generate an equal number of customers, but we needed them to hum and be in sync with each other.

Aim to diversify your acquisition channels and not only will your dependence decrease, but the optics will become flattering to potential buyers.

Swim in the same waters as your buyers

If you wanted to ask someone out, you’d have a much better chance of success if you got to know them well beforehand, rather than asking them for their number out of the blue!

Likewise, as your business grows, you should aim to build alliances with potential buyers, even when you’re not ready to sell.

“You should aim to build alliances with potential buyers – even when you’re not ready to sell”

This serves a dual purpose. First, you won’t feel adrift when considering an acquisition. Second, you will learn how these people operate. You’ll see how they receive and evaluate opportunities, and you’ll learn about how your industry does business.

We used M&A bankers for our acquisition, and that helped us get to know a number of interested companies.

You will always sell in your business, whether to employees, customers, or investors. Selling your business is the most important sale you will ever make. Pay attention to potential buyers and know that you need to be friendly with the right people in order to get the best result for you and your investors.

Sell ​​at the right time

The timing of the sale is as important as preparing for it.

There are two common mistakes founders make when they leave. The first is that they sell when the business is in trouble. This is the worst time for obvious reasons. The other mistake is to delude themselves that their past growth will continue and that they can continue to build without additional support or infrastructure.

Fanbytes had grown incredibly fast when we sold – revenue growth of 150% on average each year – but I was realistic that we couldn’t grow like this forever on our own.

So our goal was to ensure that the market and the product had reached a healthy level and we were ready to receive strategic support to move to the next level of growth.

To celebrate. To celebrate. To celebrate

As entrepreneurs, we tend to believe in the “hustle culture” – you sell and move on.

If you’ve built something significant, chances are your team will work with the acquirer in some way. It is therefore very important that you celebrate as a group. Over-hint on this. When we sold, we threw a number of parties because it really was a great stepping stone for the team to build the next phase of their career.

We tend to think a lot about ourselves during the acquisition process and what we would get out of it, but it is very important to note that this is also an important step for employees, especially those who have been with you for some time.

You’ll likely get outsized returns compared to them, but money isn’t the only motivating factor. Prestige, career development and impact are all great motivators for the team.

Be sure to celebrate them. They are the real reason for the company’s success.

A final note

I started Fanbytes when I was 21 in college. At that time, I was not thinking about corporate culture or the professional development of our employees. I was motivated by $$$, and honestly, I didn’t think that would change.

Fast forward five years, and I was rejecting potential buyers because I felt like their office vibe was off!

If you are lucky enough to have your business acquired, know that you are in a very unique position and people matter.

It’s important to take a long-term view of what this means for your career, your family and yourself. Reading the boot press might make it seem like a very normal thing, but it’s not and I think you should mentally and tactically prepare for it.

It is the biggest decision you will make in your business career.

Timothy Armoo ​​is the founder of Fanbytes, which was acquired in May.

Want to know more about Timothy’s story? Catch him at Sifted Summit in October.