Very few business owners build a business that is capable of being sold and even fewer achieve the price they expected in the marketplace. This often leaves business owners feeling confused; how, after providing the owner with many years of success, can the business be worth so little?
Here are the three main reasons a business is not saleable:
– The business owner is the most valuable asset. If the business owner left, the profitability and value of the business would be significantly impacted.
– Family members and friends are employed or involved in the business and it may prove to be difficult for the purchaser to change the way the business operates.
– The valuation is unrealistic as there is a lack of profitability and reliable financial information.
Selling the business is usually the last thing on the owner’s mind; but building a saleable business isn’t just about the actual sale. Readying a business for sale means that it can operate without relying on the business owner, creating a business that has value and provides the business owner with the freedom to continue in the business or sell.
We often hear business owners say “my business is my pension,” but they aren’t building a business that has value and could fund a retirement! This is why the process needs to start with identifying the ‘end in mind’ – the dream lifestyle that the business needs to help the owner achieve.
Here are some things to take into consideration if you want to start readying your business for sale:
- Start with your end in mind. What exactly does your business need to help you achieve? Ensure you start out with a clear idea of why you are building your business in the first place.
- Remember that this isn’t a quick process. Allow up to five years to get the business ready for sale.
- Communicate with your team. Make sure that they’re aware that this process will provide them with long-term security in their roles.
- Ensure that business processes are streamlined and that your team is comfortable and confident in making decisions in the business.
Ray Moore and Andy Sleet discuss in more detail on the Fluid Business Podcast: