How To Sell Even The Smallest Online Businesses

I’m going to show you how you can sell even the smallest startup. I’m doing it because Michael (my brother and partner at Bradford & Reed) says that entrepreneurs who hear the big sales discussed in Mixergy interviews might be discouraged and think that only big companies can be sold.

Selling a small startup may be easier than selling a large one

For a big company, buying a small startup can be as quick and easy as buying online ads. There’s little to no due diligence involved in those deals. The contracts and negotiations are quicker. And, because they don’t meaningfully change the company’s income statement, there’s little risk in them.

Back at Bradford & Reed, I probably did half-dozen buyouts of small web sites that cost under $100,000. Financially, most were of so little consequence that I didn’t bother getting my partner’s okay on them. But to the young guys whose companies we bought, the deals helped validate their work and were a point of pride.

Why big companies buy smaller startups

Most smaller startups don’t think of trying to sell their businesses because they think, “Why should a big company buy my little business? I’m too small to matter. I can’t change their business.” Well here are a few reason.

1. To learn – I recently asked a friend who runs a major online shopping site why he bothered buying a little blog. He said the blogger was a good affiliate. His company wanted to learn how he drives affiliates sales and have him teach their other affiliates.

2. To hire – My buddy Dan Gould (who was one of Mixergy’s first interviews) is working at Fox Interactive now because they bought his company. They would never have found someone as entrepreneurial as Dan by placing a help wanted ad. Sometimes an acquisition is the only way to get top talent.

3. To test – As B&R got bigger, I became risk averse. I didn’t want risky ideas to jeopardize my biggest investment. But buying a small web site and testing ideas on that was fine. If the ideas failed, we could just shut down the acquired site, but the main business would stand soundly.

4. To hide – When you’re big, all eyes are on you, which makes it harder to launch new products. Sometimes an acquirer buys a small company to launch an idea quietly.

5. To showoff – I had a company try to buy B&R because adding the size of our mailing list to their mailing list would make the resulting list size impressive to Wall Street. They didn’t care about the quality of our list as much as they cared about the number of people on our list. Sometimes, you can give another company a way to show off a larger number.

These are just SOME reasons. I didn’t even list the obvious ones, like maybe they think you have a good business and want to invest in growing it. My point is that there are more reasons then you realize. Don’t think you can’t be sold just because you’re small.

How to prepare for a sale

One of the first things I learned in my NYU business classes was to prepare for a sale the day you start your company. It’s not just so you can sell it. Making sure your company an be sold will instill discipline in you that will make it into a company that will force you to run it like a business instead of treating it like a job. With that in mind, here are some suggestions for doing that.

1. Make sure the company can run well without you. Unless it’s a talent acquisition, acquirers want to know what they’re buy will continue to be valuable if you decide to go off and start another company.

2. Make friends with your competitors. Because your competitors are often your most likely buyers, you have to walk a fine line between trying to crush them and staying friendly enough to sell to them some day (or maybe even buy them).

3. Get to know the people behind the companies you work with. The people who are doing business with you — selling your ads, or buying your services — are also potential buyers. Get to know them well enough that they can visualize you as a part of their family.

4. Don’t complain publicly. Acquisitions are as much emotional as rational. If you talk publicly about your company’s trouble, it’ll have the stink of failure on it and others will be afraid of associating with it.

5. Be proud of your work. There was a time when my competitors at B&R were so fierce and I was so exhausted that I didn’t think I could beat them. When I got a terrible buyout offer, I took it to my brother and suggested we accept it. Thankfully, he talked me out of it. There will be times when you’re so tired of the pressures that you’ll just want to take any offer. Buck up and take pride in your work. If you don’t value it, no acquirer will give it the value it deserves.

How to get buyers interested in your company

Yes, there’s Flippa.com (hear the founder on Mixergy) and you can sell your company on ebay, but I’m going to suggest a more subtle way to sell your baby.

This is how some entrepreneurs got me interested in their companies.

Step 1: Find the big, aggressive buyer in your industry.

There’s always at least one company that’ll make anyone an offer — it won’t necessarily be a good offer — but this acquirer is an offer machine.

A good way to find this company is to talk to others in your space. The ad brokers, the big affiliates, the headhunters — they all know who’s buying.

Step 2: Call the aggressive buyer and ask what they’d pay for your company.

You don’t have to be subtle with companies like this. Making offers is what they do. You’ll probably get an insultingly low number. Or you’ll get terms that are outrageous. But you’ll get something.

Step 3: Seek out advice from your ideal acquirers.

Tell them that you got an offer for your business and don’t know what to make of it. Ask them what they think of your business and in the process, suggest that you’d rather be bought by them.

What’s your experience?

I love hearing from entrepreneurs about how their buyout experiences. Tell me yours in the comments or by email. If it’s a really juicy story, let’s get on the phone or grab coffee and talk about it.

And, as always, I’d love your feedback on this post.