You’re finally realising your dream of becoming a business owner. Your business plan is in full swing, and you’re setting exciting goals for what you hope to achieve in the future. So probably the last thing you’re even thinking about is how to make sure your business is ready to sell when the time comes. Or maybe you have thought about it, and you’ve already incorporated an exit strategy into your thorough business plan. If so, well done! If not, no need to start panicking; it’s not too late to get started.
Planning for the sale of your business from day one will help ensure a more profitable sale and a smoother experience during what can be a stressful time. So, even though you’re in the midst of establishing your new business, it’s important to keep an eye on the future and ask yourself what a prospective buyer will look for.
Profitability and net worth:
This is probably obvious, but profitability and net worth are going to be the main goals of a buyer. They want assurances that business revenue will be able to cover their financial obligations and allow them to maintain a positive net worth position as they become the sole proprietor.
These are just a few of the questions that will be at the forefront of their decision-making process:
- Is the business turning a profit, and will it continue to do so?
- Is there a possibility for growth within the industry?
- Is the business in any sort of debt, or will it require any significant capital expenditures outside of the initial sale agreement once ownership changes?
This is where your ability to keep accurate records and well-organised documents will come into play. If you have documented sustained success, buyers will be eager to join while things are looking up and sign on the dotted line.
The impact of a change in ownership:
Can your business stand on its own, or will everything come crumbling down in your absence? Some businesses are so dependent on the current owner and the multiple roles they play in running the business that a new owner could mean a murky future for its sustainability.
This raises a glaring red flag for potential buyers. If the business depends entirely on one person, whether it’s the owner or a key employee who might leave, the business may not be saleable. This is something to keep in mind as you move forward. Surround yourself with trusted staff, and delegate responsibilities. Your business should function with many moving parts that can help pick up the slack if one of those parts changes or moves on.
A strong company brand:
As your business grows, it will start to build a reputation. If your company’s brand has been negatively affected by poor service or a business crisis, this can greatly affect your ability to sell in the future. Do your best to ensure your brand is strong within the community and industry. Obviously you can’t control everything, but the more you focus on your brand and reputation, the more you will benefit in any future negotiation processes.
A strong market position and customer base:
Strong businesses are able to differentiate themselves from their competitors by offering distinct products or services. Potential buyers will take a thorough look at your company’s products and operational processes in order to help assess the strength of your company’s market position.
Along with market position, buyers will also consider if you have an established customer base that will remain with the business after the sale. The greater your ability to demonstrate a large and loyal customer base, the more appealing your company will be to buyers.
These are only a broad overview of areas to maintain as you build and grow your business. The most important point to remember is the earlier you start planning for a future sale, the better.