Last week we talked about the importance of starting with the end in mind and why you need to have a business exit plan. Both will guide your business decisions throughout your entrepreneurial journey and ensure you stay on track with your long-term goals. Today, we’re addressing the exit plan of selling your business. Let’s dive into how to build a sellable business.
Sellable Business Considerations
If you’re interested in the prospect of selling your business, here’s the 4 things you need to consider according to the Cerity Partners article “Is Your Business Sellable”:
Owner Reliance
Your business needs to be able to function and thrive without you. If your business is too reliant on you as the owner to operate, most buyers won’t be interested.
Think through the question, “If I went on vacation for 30 days with no contact or connection to my business, what would happen?”. Your answer to that question will indicate how much your business relies on you and help you plan for ways to reduce owner reliance.
Management Strength
Most buyers want to buy, not run the business. Buyers look for strong management teams to make the transition smooth and increase chances of continued success.
Financial Reporting
Your financials are the history of your business and paint a picture of where it’s headed. Therefore you need strong financials and financial reporting (i.e. balance sheet, profit and loss statement, etc.) to illustrate that smart business decisions are being made. With strategic decisions being made based on data profitability increases and your business has higher value to potential buyers.
Business Systems
Having good business systems that are fully documented leads to a better run company and makes you more appealing to buyers. Without automation and systems it will be hard for a buyer to make a smooth transition and continue operating the business in a way that leads to success.
Built to Sell
Along with the four things mentioned above, you need to be sure your business also has a strong brand and is leveraging technology in order to be sellable. Buyers want to know your business is recognized in the marketplace and runs efficiently.
And above all else a sellable business ideally has these 3 factors:
Profitability
Buyers want to see if the business can generate a return on their investment, which means you must show profitability historically and forecasted for the future.
Growth Potential
The potential for growth is also a key factor for most buyers. They want to see the business has room to grow and expand its reach in the marketplace.
Scalability
Scalable businesses are also more appealing to buyers. Scalability shows the business can grow without having to invest a lot of time, effort and money.
Conclusion
The truth is most businesses that are up for sale, don’t sell. This happens for a variety of reasons. So if your goal is to sell your business one day, it’s important to make sure your business is in good financial shape and is appealing to buyers based on the factors discussed above.
If you need help figuring out if you are building a sellable business, be sure to book a free business coaching session today!
