Timing has a lot to do with the Facebook IPO
Attention business owners! Looking to sell your company? Not sure when the right time is to sell? You might want to use the upcoming Facebook IPO as an example.
Facebook will have a potential valuation of about $100 billion. To put this in perspective, Google was valued at $33 billion when it came public. Groupon was valued at $12.8 billion when it went public. So the Facebook IPO at $100 billion?! Is that insane or what?
Facebook also is selling right at the time when their business is maturing. On Monday, Facebook disclosed that its profit declined from their last quarter in 2011 because they spent more money and had some “seasonality” in their advertising revenue.
Facebook still has major growth potential but pretty soon its growth will have to start decelerating. It happened to Amazon, Ebay and Google, and it will happen to Facebook.
So what you can learn from the Facebook IPO?
Sell your company as your growth is peaking, just before it hits full maturity. Buyers need to feel that there is still an upside to what they are buying. Otherwise they won’t buy your company at the price you want.
Don’t be the only face of your company. If you are, your business won’t be worth as much when you are no longer there. Facebook has a smart team of executives who are running the show. It’s not just Mark Zuckerberg.
Even if you have no plans of selling your company today, at some point you might want that option to sell. You need to start planning 3-5 years before you want to sell. Although Zuckerberg didn’t start Facebook to make money and take it public, several early stage investors wanted to cash in on their investment. They even sold their shares privately in a secondary market. My guess is that they laid the groundwork for the Facebook IPO a few years ago.
Think about what you can do to consistently grow your company. Imagine yourself ringing the bell at the New York Stock Exchange, when your company goes public. Game on.
© Copyright 2012 Justin Krane, CFP