Rory has 25 years of experience in the Canadian tech space, operating and advising some of the fastest-growing companies in the world. From guiding startup founders and their investors to heading partnerships for tech giants like Google, Microsoft, and leading Twitter’s business in Canada, Rory brings a wealth of knowledge to his position as COO of Redbrick.

Few things prepare you for the process of selling your business because the skills you developed to start, build, and scale a business don’t necessarily translate to selling one. And yet, that single transaction may be the most important deal a founder or CEO ever makes, for themselves and the people backing them.

I’ve been on both sides of the table guiding founders and buyers through the acquisition process. While the process is always unique to each sale, I thought I’d share some pointers I’ve picked up along the way.

1. What does a good outcome look like for you?

Most founders are out on their own, operating businesses at different levels of success with different levels of involvement from boards or stakeholders—or no one at all. It can get lonely out there. They may have angel investors who came in early or maybe they’re totally bootstrapped and have no accountability to anybody outside of themselves.

The first question I like to ask founders who are selling their business is, what do you want your life to look like after the deal? Maybe you want to sell your company and get out to do something completely different because you’re a startup founder and you love the “zero to one,” but you hate the “one to ten” of scaling a business.

Or maybe you love your business and your real goal is to stay involved on the other side of the transaction, but you want to take some risk off the table, bring in collaborators, and fund what’s needed to grow.

For example, at Redbrick, we prefer to acquire companies with a leadership team that wants to stay intact and continue in the business. Established teams are gelled: they know how to work together, are passionate about what they’re working toward, and want to stick around to keep going. If you’re a founder leading that kind of business, maybe you’re seeking more funding, more collaboration, or need the support of a Shared Services model like the one Redbrick offers so you can focus more on product.

Other founders can’t fathom the idea of working outside an autonomous environment and want to sign the papers and move on to their next venture. That’s fine too. But the real difference between these two tracks of founders isn’t the kind of business they’re running or how they’re running it, it’s what their personal “good” outcome looks like.

So, be honest with yourself: what do you want? The truth will be a major factor in what kind of buyer you pick and how the deal gets structured.

2. What is your business worth? — no, really.

There’s a disconnect in the market right now and it’s coming to a head in the bid-ask spread. I may be biased because I’m the buyer in many of my current conversations, but I’m seeing so many businesses with lofty expectations on their valuation, tech businesses in particular. The problem is, those expectations are based on the past three or four years of very frothy market conditions that have resulted in inflated company valuations.

I really feel for the companies raised in that frothy market, I’ve worked inside a few of them. They set a high bar for how much they have to grow and maybe took their last fundraising round on the assumption they’d be able to raise the same amount or more, at a higher valuation, again. But now, with a dramatically different fundraising environment and more cautious investors, those businesses have typically made cuts and are running out of money to keep going.

Now, they’re faced with a tough choice: accept a lower valuation (and the pain that can go along with that) or not get funding at all. And so the conversation becomes, should I sell my business?

But, because of the bid-ask spread, buyers and sellers are at an impasse. You can avoid this stalemate as a seller if you get really crisp about the value of your business.

"Always know what your company is worth to your top three buyers. "

Your business is going to be worth something different to each of your top three to five buyers depending on their business model. If you can figure out the metrics that have shaped each buyer’s valuation of your company, you’ll have an edge on how you drive your operating plan for the time you have left in the business.

Start by asking your potential buyer questions like: do you value businesses based on revenue multiple? Or do you value based on EBITDA multiple? Based on what kind of business you are, you’ll find more success with one buyer type than the other.

An EBITDA multiple buyer will buy based on profit multiples. Companies that have been focused on driving profitability will probably find a better deal with them versus buyers who are revenue multiple-focused. Those buyers care more about your top-line revenue growth than your profit.

Let’s walk through an example: say I’m a massive corporation that wants to buy your business. I don’t care about your profitability because I’ll likely integrate your product into my ecosystem. My company will run your business differently and generate profitability that way so I’m not going to pay for your business’s current profitability, I’m probably going to value based on revenue, or something other than profit.

Understanding these motives can help you strategize to raise your valuation. If you drive more top-line growth right now, will your ideal buyer value that more or less than profit growth? In every situation, the characteristics of your buyer should dictate how you approach them as a seller—and offer some insight into how they’re going to run your business.

Bottom line: understand your valuation and appreciate that the valuation of your business is relative to your buyer.

3. What are your strengths and weaknesses? And, are you being open about them?

Know them and talk about them. Pound your chest, tell buyers how awesome your business is and what you’re good at, a good buyer will validate that—but don’t leave out the bad stuff. Buyers conduct intense due diligence processes that usually stretch over multiple months. That process can be difficult for you as a seller as buyers tend to be very thorough in an effort to understand your business.

Sometimes founders or operators play a game trying to hide the bad things and drive a higher valuation. That game breaks down in due diligence. It’s better to not waste everyone’s time, most importantly your own.

"Assume a buyer will uncover the soft spots in your business, anything that’s not going well—because they probably will. But they’ll also see where your business is strong."

Be clear about the weaknesses in your business because, often, it’s the things that aren’t going well that make the business attractive to a buyer. From a buyer’s perspective, weaknesses are opportunities to create value and make your business more resilient.

How does that serve you as a founder who’s trying to sell? Well, you’ll be choosing a buyer that compliments your business’s strengths and weaknesses. And, of course, being transparent about weaknesses will get buyers to the table and move the transaction along faster.

4. Have you made time for this process?

There are fewer busier people in the world than scaling tech founders. The process of selling a business has a similar time commitment to raising a round of financing. As buyers, we try to make that process as straightforward as possible. But transactions take time.

You’re going to be busy. You’re going to be talking to multiple buyers, often all at once. That process can stretch out beyond six months and, unless you’ve planned for it, you’ll get behind on product development, marketing, or being there for your team. Founders fall into the trap of devaluing their own business when they prioritize a sale above daily operations.

During an acquisition, your ability to surround yourself with support, allocate your time rationally, and delegate your usual workload to other people is what will get you through it. That way, work will still get done. It's what’s best for your sanity, your business, and your buyer.

If it doesn’t feel right, don’t take the leap

Acquisitions tend to be metrics-driven. There’s so much math and so many competency checks that have to happen during the due diligence period where both the seller and the buyer have to satisfy these criteria in a quantitative way.

And yet, sometimes all the math checks out, boxes are ticked, and you have a clear answer to each of the questions I just posed…but something still seems off. Don’t ignore your gut feeling. Ask yourself: does this feel good? Know that any good buyer is asking this question of themselves constantly. You should ask it too.

That’s a foundational question that both you and the buyer have to answer before signing on the dotted line. Business has to feel good in a way that sometimes can’t be quantified. Revisit what outcomes are important to you, check in with yourself: have I had enough time to make this decision? If it doesn’t feel right, get clarity.

The decision to sell a business that you’ve worked so hard for, that means so much to you and many people around you, is a huge one. There’s a lot on the line, including financial gain and reputation (not just for you, but also for the people who have invested their time and money in you along the way).

To make the process perhaps a little bit easier, check in with yourself as you move through the wild world of selling a business:

• Be clear about the outcome you want for yourself and those around you.
• Stay objective about the value of your business and be prepared to understand how different buyers value it.
• Know where your business is strong and where it isn’t, and be open about it.
• Ask for support, delegate, and manage your time so your business doesn’t fall behind.
• And make sure the deal feels right to you after all the boxes are checked.