How to confidently set your price when planning to sell your company

Bonnie Elgie

Exiting a business is a process, not an event, and the right opportunity can come up on you unexpectedly. With a proper plan, you’re ready to take advantage.

While selling a business during a pandemic isn’t easy — especially in an industry heavily impacted by the economic fallout —Tea Nicola, co-founder of WealthBar Financial Services, shares her tips for knowing your numbers so you’ll be ready to sell when the time is right.

We recently chatted with Tea Nicola, who launched this first-of-its-kind tech-enabled startup with her husband Chris in 2014. The company offered financial advice and professional wealth management services to average Canadians without the need for hefty funds expected by most wealth management firms. Tea and Chris sold 75% of the company to an interested buyer in January 2019 and sold the remaining 25% in May 2020.

In this article, you’ll learn:

  • Why you should know your sell price at all times
  • The difference between a bottom-up and top-down approach to prepare for a transition
  • Tea’s advice for any entrepreneur


Q: Let’s start with a bit of the backstory. Can you tell us how the sale of WealthBar came about?

As a tech-enabled service startup launched in 2014, WealthBar took on angel investors. When you do that, you commit to some kind of exit or liquidity event for those investors. We spent several years developing and growing the company to over 42 people and $375 million in assets under management (October 2019). During that time we also secured additional financing funds. In early 2020, an interested buyer bought the majority stake in our company (75%) with the agreement that Chris and I would keep 25% ownership and continue to run the company.

However, with the onset of the global pandemic and the acquiring company completely changing the senior leadership team, the strategy changed. Our original model of 25/75 did not work anymore and so we exited the remainder of the company in 2020.

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Q: How did the pandemic impact your exit from the business?

The pandemic definitely amplified uncertainty within the sector. The digital wealth management vertical is like a snowball rolling slowly downhill and it's very hard to get traction. Customers are very sticky with huge long-term potential. It requires a lot of intestinal fortitude to get through this industry and the pandemic certainly amplified the risks.


Q: Given your success, what advice do you have for entrepreneurs looking to sell or transition out of their business in the next couple of years?

As a numbers and process-driven person, I always made sure I knew what my business was worth—both from an investor return perspective and the market at large value. I monitored merger and acquisition activity in my industry on a quarterly basis. I also made sure that our value from the bottom up was justifiable and that we could meet the multiples and the ideals of the space. If a buyer was interested in the business, I knew what my sale price needed to be at any point in time.

The most important thing an entrepreneur can bring to the table during a sale is a certainty of what they want. Negotiations can be cutthroat, and if you go in without knowing exactly what you need to come away with, you won't know when to say “no” or when to say “yes”.

My sales were successful because I knew exactly what the price had to be and what the customers had to hear. I took the emotion out by knowing my numbers.

As entrepreneurs ourselves, we get what it means to be a business owner. We have decades of experience at the top accounting firms in the world. Reach out to have us on your team and take your deal to the next level.


Q: What steps should entrepreneurs take to prepare in advance of a transition?

Taking the bottom-up approach is to understand what your financial situation looks like, including your capitalization table, your investors and the cost of capital in your particular business stage.

I tracked all the investors in a spreadsheet quarter by quarter, noting when they invested and making sure each dollar invested was given its proper cost of capital based on the time it spent working for the company. That gives you the enterprise value of your company any time you need it. The next important thing to do in this bottom-up approach is to make sure your revenue and growth supports that valuation.

If you opt for the top-down approach, start building relationships with merger and acquisition firms. They’ll be happy to talk to you in the hopes that you’ll pick them when you’re ready to sell. Take care to find the one that does decent analysis in your field. Also, certain investment bankers conduct ad-hoc market analytics when you want to track enterprise value over revenue, enterprise value over EBITDA, or if you're a growth company using a non-standard metric that’s specific to your vertical. You’ll know how companies in your space are valued.

You can track to see the difference between the approaches. Tracking can be done in a spreadsheet. It doesn’t have to be complicated or take a significant amount of time. I did not spend hours and hours tracking, but I kept asking myself these questions and tracking the answers--What will enterprise value give investors in return and what is the revenue and growth? Where are we at in the marketplace? If the market paying what we need to make, maybe it's time to sell. If the marketplace is paying half what we need, then maybe more work is needed before it’s time to sell. Maybe it's time to pivot, maybe it's time to spend less money.


Q: Is there any last advice you’d like to add?

Yes, and this is my standard advice to all entrepreneurs: ask for a lot of advice and read a lot of stories of other entrepreneurs, but make your own decisions because you know your business the best. Every piece of advice you get is biased, even if it’s given with your best interest at heart. If something doesn't fit and you know it deep down, trust your gut. You are the “parent” of your business and nobody really knows your baby the way you do. And so it's really important to balance personal opinion and influence with your personal expertise about your business. Don't try to fit a square peg into a round hole. It's best to understand that free advice is seldom cheap.