Every step you’ve taken in the process of building a company now has an impact when it comes to selling. The start is no exception. Decisions you’ve made while setting up your company affect the way a transaction can happen. There are so many questions you should ask yourself as you begin thinking about your company’s potential exit. In summary, “Begin with the End in Mind”. Be sure to pay attention to these questions that began at the start of your company as they will become important as you move along in the selling process. Let’s take a look at a few of them:

How did you organize your company?
There are multiple types of ownership. There are different implications whether you are a sole proprietor, a corporation, a partnership or an LLC. If you are the sole proprietor, you have complete control of the decision process. Partnerships, corporations and LLCs (excluding single ownership LLCs), on the other hand, involve multiple parties that need to align on goals. Not considered enough in the beginning but often a stumbling block later, does everyone involved want to sell? If not, do they have the ability to stop the process? This is a question that is often overlooked and can create roadblocks further down the road after time and money has already been spent. It’s unfortunate when this happens as it can be cleaned up prior to starting the process of building your business. 

Who has to approve the decision to sell? 
Again, if you are a single owner, the answer to this question is easy: you! Once you start the process you can carry it to the end as the decision is yours to make. But while this may be the case in some instances, often this is not the norm for most companies when considering a sale. You may have multiple owners, be it 2, 3, or more. With multiple owners come multiple opinions on what is the right move or place for your company. If there are multiple owners, there are percentages of ownership associated with each owner. Are you sure that every owner is on board with a sale and your Exit Strategy? Do they have the same vision for who should buy the company and the direction it should take? Who has the majority voting rights for your company? Will they be on the same side as you when it comes to making decisions in the future? Do you have a functional board of directors (BoD)? And if so, what is their responsibility and what are their voting rights? We would also suggest that you go back to your company bylaws and check how and when you need to involve your investors. Maintaining alignment with your core investors and BoD is critical every step of your entrepreneurial journey.

Where did your financing come from?
As you most likely well know, there are multiple ways to finance a business. Did early financing come from friends or family? Angel investors? VCs? Strategic investments? Loans? Or for newer businesses, crowdfunding? All of these can have an implication, such as how a loan or line of credit is accounted for in the transaction. If it is a strategic investment, it can impact who a potential buyer could be (strategic investments are always looked at as a risk by other strategics when looking at buying a company). Have you sold any distribution rights to help fund your company? Etc.

In summary, if you think it’s likely you will sell your business in the future, begin with the End in Mind – even if you are “in the middle”. It’s never too late to look at these issue and adjust accordingly for your own future benefit.