How to Run Your Business So You Can Sell It!
Starting a business and working to make it successful entail a lot of work. An astute business owner should operate the business as if he or she is preparing to sell the business. Industry statistics claim it takes five years or so for small businesses to change hands. For one reason or another, you will not be in the business for the rest of your life. You will want to sell it one day. No one wants to sell a business for a loss. It is therefore a wise practice to prepare for a profitable exit or sale of the business.
Preparing to sell a business runs hand-in-hand with ensuring the smooth operation of the business. Look carefully at the different aspects of its operation, as they will have an impact on the sale. Here are some tips to make your business more saleable and profitable.
How to Sell a Business
1. Think from a buyer’s point of view. What is appealing to a potential buyer? Which parts of the business need improvement? Identify what should be done in the company to minimize the risks for a prospective buyer. Understand that a buyer wants a functioning and profitable business.
2. Reinforce the advantages of the business – the brand, its large customer base, market share, technology, know-how, skilled work force, etc. Potential buyers look for recurring revenue such as subscriptions or long-term contracts. The company’s copyrights and patented technology that is difficult or too costly to replicate or work around are also plus factors above your competition. Invest in automated processes that make your operations faster and simpler while minimizing human errors. Implement strategies that improve growth and profitability. Showing actual growth to buyers is a more effective sales pitch than talking about the business’s potential.
3. Resolve problems in the business early. Examples are dissatisfied customers, a problem employee, lawsuits, breached contracts, system flaws, claims, etc. By identifying and fixing issues at once, the business operation is unhampered and productive. Delaying resolution may exacerbate the issues and take its toll on the morale of the stakeholders and on the company’s profitability. These issues could hurt your business and scare away potential buyers.
4. Always have enough inventory. You do not want to lose your customers by not being able to meet their orders when they need it. Frequent delay in the delivery of products hurts your business reputation. Your inventory list should be current.
5. Selling a business is like selling a house. When selling a house, you make sure it is clean and presentable. You give it a fresh coat of paint. It is the same when preparing your. Keep the premises clean. Renovate, if needed, and keep everything organized. Dispose of outdated inventory and make sure your equipment is in good working condition.
6. Make sure your financial records and other documents are up-to-date and accurate. Understanding the true financial state of your company is a step to improving the financial condition of your business. Always be ready with your company’s documents so you can produce them in a timely manner. Include financial records for the past 3 years (profit-and-loss statements, balance sheets, tax returns, etc.). Other documentation such as employment agreements, insurance policies, customer and vendor contracts, equipment/premises and other leases, and bank statements should also be readily available.
7. Draft and institute manuals, systems and procedures for various aspects of the business operation. These policies should be easy to understand and address possible scenarios that may crop up. They will make training an employee or even a new owner easy.
8. Join a peer group of managers or business owners, or an industry organization. You can benefit from experienced members in these groups. These are forums where problems, opinions and business ideas are shared. They are great sources of practical guidance and business tips.
Remaining in business while the business is for sale is critical. A buyer wants a company with ongoing operations and with certain sales from day one. By operating your company in the best way you can early on, you will have a better chances to sell it and make more money until the sale. Implementing the tips above will immediately improve your business. Can you add to these tips?