ForSale

On the heels of Google’s $3.2 billion acquisition of Nest, and Snapchat’s rejection of Facebook’s $3 billion offer late last year, it’s time to talk about the hard choices that successful entrepreneurs face when it comes to selling their business.

I faced this tough decision early on. In college, I started a pest-control company with a couple of buddies, and we spent the first summer not only running the business out of a cramped trailer, but living there too (and bathing in a local swimming pool). We made an effort to reinvest as much money as possible to help the company grow. Although we paid our employees well, the other founders and myself took home meager paychecks. We came a long way in just a few short years, and before we knew it, were offered $1 million.

We turned it down, convinced we could do better.

Fast forward 20 years later, and this small pest-control company grew into the largest home automation services company in North America. In late 2012, we accepted a $2 billion offer from Blackstone Capital.

Over the span of two decades, I had thought plenty about when would be the right time to sell the business . I’m 45, but I have put in the career hours of someone thirty years older. And let’s be real, a financial payoff is tempting when you have two children in their teens, 7-year-old twins, and a 3-year-old. It’s not like the price of college is decreasing each year.

Beyond a financial reward, I was concerned with continuing Vivint’s mission of improving the safety and simplicity of people’s lives. Selling to Blackstone was the best way for us to expand our reach.

Here are some guidelines that I followed when I made the decision to sell. They helped me and I hope they can help you.

First, you need to determine your end game. Everyone who starts a company believes he has a million-dollar concept, product, or service the world needs. I’m not the first, and certainly won’t be the last, to tell you that most of the time, that doesn’t happen. If and when an idea does take off, there are a thousand questions that follow: should I sell? If so, when? Would it be better to go public? Should I stick it out over the long haul or let someone else take the reins?

There isn’t necessarily a “right” choice to make, because many people have been successful making choices – even when the decision is not selling. Snapchat passed on a lucrative offer from Facebook because selling for some short-term gain simply wasn’t interesting to them. Mark Zuckerberg turned down ample offers to sell early on, and it’s paid off for him and Facebook. On the other hand, the Russian kid who created Chatroulette probably should have sold when he had the chance.

On the other hand, Nest chose to join the Google family because it had the business resources, global scale and platform reach to amp up its growth. And Twitter went public last year to show that it is ready to play in the big leagues: listing its stock for the first time on a big exchange, inviting regulators to look at its books, and having stock that it can use to buy other companies.

Something else to consider is teaming up with a strategic partner. What ultimately led me to sell was the understanding that although Vivint had the ability and vision to succeed, we needed the capital to get there. Our plans for continued growth required a different capital structure, and our buyer turned out to be the perfect strategic partner to carry out our vision for the future. Our buyers operate the second largest equity fund business in the world, so we knew that with their expertise, together we could create something pretty sweet.

We all know companies that have essentially disappeared after being bought. You don’t want to team up with someone who will make your business an afterthought. You have to make the right choice for you and your company and choose someone who wants to not only join, but also further your cause.

When serious talks begin between the buyer and seller, you have to maintain an even keel and not let all of the zeroes in the check blind you to what you need to do. Be polite and respectful, but firm and clear. You need to call the (important) shots during the sale. For example, even though a buyer would be taking control, I still wanted to be involved in leading the company into its next phase. In addition, I wanted to reward the people around me who played a role in our expansion over the years. I insisted we retain our existing management team, because they had driven our innovative customer service and sales approach. Ultimately, you know your baby better than anyone else, so pick your battles.

Finally, be prepared to cede some control. Selling your company is a big achievement, but not being the top dog anymore can take getting used to. When someone else has the final say on the big decisions, you can feel a bit small. To avoid butting heads, be sure you get the lowdown on what your new role will be and what exactly will change. Talking it out beforehand can prevent shouting it out down the road.

Although I’ve often heard entrepreneurs cite burn-out as a reason for moving on, if you’re not only still passionate about what you do, but more committed than ever to seeing your company succeed, then keep building. Or, start selling. The line between the two is never quite as clear as you’d like it to be, but that’s the thrill of being an entrepreneur.