If your business is a key personal asset, then selling your business is one of the most important things you will do in your life. Selling a business and getting paid what it is worth is always a significant challenge. Here are six moves you can make as a business owner to ready your business for sale that will be accretive, or increase the value of your business at the time of sale.
“Don’t be afraid to give up the good to go for the great.”
— John D. Rockefeller, oil tycoon and philanthropist
1. Strong Management Team
The first move you can make is get the right people around the management table. You, the owner, do not want to be the only senior voice of experience that drives value. You want a team of people that can work together to develop solutions for the most complex problems or opportunities. Ask yourself this question: if I was forced to step away from the business for six months, would my business grow or decline? If you are not 100% confident it will grow, then you need a stronger management team.
2. Clean, Good Financials
Good financials is a two part move. First, your financials need to be objective and verifiable, and they need to clearly and simply reflect what it takes to run the business. You do not want to be explaining your financials; they need to speak for themselves. Secondly, you need a steadily increasing top and bottom line. But having profitable years is not enough for buyers. Cycles, significant declines, or inconsistent results, even for just one fiscal year, cause potential buyers to ask questions about financial risk.
3. Good Processes
Buyers want businesses they are sure they can run at current levels or even improve upon. To this, they are looking for businesses that have repeatable processes that are going to succeed the business transition or sale. Your processes cannot be contingent on specific individuals; they must be entrenched in the business even if key personnel were to leave.
4. Revenue Certainty
Of course businesses have greater value if revenue has consistently been increasing, but buyers want to know this will continue. They will look to de-risk revenue forecasts by looking at what clients or revenue streams have a high level of certainty of continuing, even after the business is sold and ownership changes.