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Episode Date: December 31, 2014
https://youtu.be/-TbR-YZpG7E
It can be the most emotional and difficult decision you make as a founder. You've worked so hard to get here -- but things change. Whether it's going gangbusters and purchase offers are piling up or it's spiraling downward and you're facing a shutdown, preparation is key. Recognize the signs and exit gracefully. In this Startup Basics, Jason breaks it down: "When should I sell or shut down my company?"
Top Insights
- Failing is the precursor of success.
- If you're getting depressed about the process, get professional help. Talk to someone. There is nothing to be ashamed of.
- This is the most emotional decision a founder has to make because they're giving up their baby and someone else is going to take over.
Firing people is easy compared to the decision of "should I sell my company?" - Jason
- There are many different pieces to this that make it very difficult for a founder.
- They're not in love with the business anymore. They wake up and don't want to come to work. Life is short so make sure you enjoy what you're working on. If you're bored, frustrated, or tired of working on your business — you should start the process of talking to potential buyers. Be honest with your investors so they can get involved in the process.
- They love the business, but they've been given an offer that is much higher than the business is worth. For example, instead of making $6 million over 10 years, you get an offer of $18 million today.
- Your investors have been patient. It's year 7 or 8 and they need to get a return. You have 3 options:
- The company can buy their shares.
- You can sell their shares on the secondary market.
- You can sell the company.
- The founders don't get along and don't want to do the business together anymore.
- A third-party comes in and buys the shares of one of the founders.
- If the company has enough money, you can sign a note (a loan essentially) to the other party that states the value of their shares, how much you will give them now, and how much you will give them over a defined period of time.