How to Build a Company You Can Sell
You’re just starting to get your business off the ground. It will take weeks of hard work to make it happen, and it may be some time, months, maybe years before you see the real payoff. One way to think about it, though, is that you shouldn’t actually be focused on building your business. Instead, you should be focused on how to build a company to sell.
Wait, What? I Just Started Building My Company!
If you’re just getting started, you may be left wondering why you would want to already be thinking about an exit strategy. The simple reality, though, is that every entrepreneur should think about how to build a company to sell. Even if you don’t ever want to sell it, this mindset will help create direction, and drive revenue. If you build a business with absolutely no intention of selling it, you may be stuck with your business forever, whether you end up wanting it that way or not. But we want to talk about how to build a company to sell it someday because that means you’ll design your entire operation more efficiently. You’ll continually be able to see how your business is growing, create a solid financial picture on a regular basis, and implement procedures nearly anyone could follow. Keep in mind that if you’re worried about which business models create sellability, you shouldn’t be. Almost any business can be marketable by simply following the right steps.
Making it Happen
What needs to change to ensure your business will always be ready to put on the market? The good news is that many of the steps you should take are fairly easy to incorporate into any industry and at any point in time in the lifecycle of your business. Alright, here it is: how to build a company to sell.
A Good Starting Place
The process starts with your products and services. You want a scalable product or service. These tend to be more broadly valuable, so, naturally, lots of people tend to want them. They’re also easy to add to, so you can easily build the average sale. More than that, though, they’re easy to transfer from owner to owner, and that’s key if you ever want to leave your business.
Make a Move for Recurring Revenue
As you think about those scalable products and services, you’ll absolutely want to consider the process of your business attaining recurring revenue. Creating a business with recurring revenue means a steady stream of income you can demonstrate on any profit and loss sheet. Customers will consistently purchase your product or service month after month, which can add to the predictability many potential business buyers want to see. Businesses from every industry have transformed their offerings to fit into this model, so feel free to get creative as you think about how to build a business to sell.
Create Standard Operating Procedures
Once you’ve better defined the kinds of products and services you should be marketing, the next step is to ensure you put standard operating procedures into place throughout your company. If you’re unfamiliar with this concept, it’s basically the idea that you create easy-to-follow documentation to help any employee carry out the routine operations required by your company. No matter who handles the tasks required to make your business move forward, those standard operating procedures mean quality control, uniform performance and efficiency at every single turn. Creating them is easier than you might think, too. Start by thinking about all of the tasks that must be accomplished to make your company successful on a day to day basis. Once you know what must be done, do it. Think about the process involved. After you’ve done it repetitively a few times, use documentation tools to show how it works. You could even record yourself doing it, then send it to an internal team to create the associated documentation so someone else could follow the steps. Wondering why this matters in terms of sellability down the road? It’s simple. These procedures mean your customers get the same product or service, every single time, regardless of if you are the one delivering. They also spell simplicity for buyers who are looking to continue exactly what you do.
Know Your Customers
What you do as a company is only one piece of making sure it’s ready to be placed on the market at any point in time. Almost as important is your customer base. Be sure that you have clearly defined customer targets in place that anyone could use to create a new marketing strategy. That process begins with gathering as much information and data as you can to help better define your ideal client or customer. Perhaps you have analytical information from your website. Maybe you have survey information or feedback from a marketing campaign. If you have information at this stage of the game, it will really help define the next few steps. Build out buyer personas. Begin by listing the characteristics and traits your customers share. These may not only be things like age, gender, and income, but they could also be ideas about what your ideal target enjoys, values, or believes. Once you know that, think about what your customer targets are truly trying to achieve. If they’re looking to connect with others, increase personal wealth, or just solve a key problem, you’ll be better able to identify how to help. Next, identify their challenges and pain points. Then, think about how your product or service could help. Finally, imagine that perfect customer. Know how they might have heard about you and how they feel once they’ve purchased your product or service. This entire process will help you know exactly how to shape your company and your marketing strategy.
Don’t Forget to Track Everything
The single best thing you can do is begin tracking everything from day one. Whether you choose to utilize analytical tools like Google Analytics, or you have another way to track what you do, the ability to show what you’ve done, what worked, and what didn’t will help you instantly become more attractive to a seller. Measure your repeat business so you can grow those numbers down the road. Take a close look at how you are acquiring new customers, too, and work to pin down what’s most attractive to them. The more data you can collect, the better your overall picture will be for a potential buyer.
Extensively Record Your Financials
Document your financials extensively too. You should probably be working with a dedicated accountant, or at least using online accounting software meant for businesses like yours. When you actually prepare to sell your business, you’ll want neat, orderly records that are easy to gather.
Build the Right Team
Build a team that’s completely invested in your company. You may be your company’s best salesperson, manager, and cheerleader, but if you’re looking to build a business you can sell in the near future, you want to build a team around you that isn’t dependent on you to handle everything (or anything). Hire a sales team that will help you make your financial goals. Create a leadership team that will stay even after you’re gone. Reduce the company’s dependence on you for the best possible results.
Even If It’s Not Time to Sell . . .
You may not be building a business you’ve even considered selling yet, but the sooner you know how to build a company to sell, and what would make it attractive to a buyer at any stage of the game, the sooner you can build a thriving company that will prove profitable to you in the long run. To learn more about how we can help make it happen, reach out to us today.