So You’ve Started a Business And Are Thinking About Selling
Some entrepreneurs dream of founding a company that will become their legacy; they want to work in it until they retire and maybe even pass it on to the next generation. Others start with the aim of building a business to sell. Neither is the “wrong” answer; it is a matter of professional and personal goals. However, regardless of the intention, building a sellable business, one that can operate without you, right from the get-go is a smart move.
Doing so leaves the door open to opportunities down the road. You may want to start and sell the business quickly. You may decide a few years into it that your passions are elsewhere or that you need liquidity (and flexibility) for new ventures. Again, both can be right answers! The key is to set yourself up for success from day one.
Want to Start and Sell a Business?
There are two sides to building a business to sell. One involves the nitty-gritty of analytics, operating procedures, documentation, finances, etc., while the other deals with the emotional side – or at least the “This is my baby and I’m going to be a helicopter parent” side. Let’s start there first.
Hire the right people, and let them get to work. You do not have to wear all the hats, juggle all the balls, or put out all the fires. The day-to-day should be left to your capable team. Not only does this free you for higher-level strategic work, but it also sets you up to build a business that can function without you. This is crucial when you want to start and sell a business.
You can even take it a step further. Go away. Take a vacation for a week or two, during which you are completely unreachable. When you come back, take a look at any issues that arose. Where were the sticking points and bottlenecks? (Or did everything run like a well-oiled machine?) Use this intel to solidify processes and strengthen your team.
Let Them Fail Forward
If you can cede a little control, your team may (and often do) discover more efficient ways to produce desirable outcomes. As an owner, you want to jump in at the first sign of struggle. If you let it go, it can become a fantastic teachable moment. Of course, you don’t want to sit back and watch a disaster unfold, but watching from the periphery can be useful. Think of it as a parent: you watch to ensure your child is safe while they climb the steps to the slide by themselves for the first time.
These steps will help you begin to separate yourself from the company. You’re not one entity: this is an asset, and it can be sold to help fund your future plans, whether retirement, a new business, travel, or other goals.
Now let’s get down to brass tacks. When building a business to sell:
Use a business analytics platform (e.g. Google Analytics, Clicky, etc.) to track performance. When it comes time to sell, potential buyers don’t want a lot of “hot air” about how much potential your company has. They want numbers.
Make Sure You Have Documented, Repeatable Procedures
Imagine if your grandmother/great uncle/whoever has a great recipe for killer spaghetti sauce. There’s a few secret ingredients that make it unique – and a crowd-pleaser at dinner parties and family gatherings. When that person is no longer with us… neither is that mouth-watering sauce.
It’s true of your business. If your processes, practices, and methodologies are locked up inside your head, or the heads of a few top-level team members, then you risk losing out on that knowledge. And, when it comes to a sale, it makes your company less valuable in the eyes of prospective buyers. Write. Everything. Down. Document your processes, and ensure they are repeatable. This does not mean they’re set in stone forever, but it does give new ownership the ability to hit the ground running.
Shore Up Your Customer Base
Ahead of a sale is a great time to look at your marketing/advertising efforts, and invest in this area. Again, new owners want to move into a situation where they have a steady client/customer base.
Get Your Company Valued
A professional, third-party valuation gives you a starting point for planning. Many business owners either under-or over-value their companies, and this can make for a frustrating process. Buyers will need this information, but it is also important for you. For example, if it’s valued at a lower price point than you thought, you can take the opportunity to ask why. What processes or systems need to be updated and/or improved? Does your team lack breadth and depth? Where are the red flags that are bringing down value – and how can you work to reverse those trends?
Building a business to sell is intense work, and it encompasses a myriad of aspects, both logistical and emotional. Consult AMB Performance Group for guidance; our team is committed to ensuring the sale of your business helps you accomplish your next-step goals. Contact us today!