How to improve the sellability of your business

If you want to sell your business successfully, you need to reduce the risks that buyers might see in your deal. Buyers don't like to pay a lot of money upfront for a business that might not perform well once you have left the business. To address this risk, they might offer you a deal where you get paid over time, based on the results of the business. This is called an earnout agreement.

But earnouts are not good for entrepreneurs, because they limit your freedom and control over the business. Many earnouts fail, and you end up getting less money than you expected.

To avoid earnouts and get a better price for your business, you need to think like a buyer and identify the risks that they will worry about. Then you need to work on reducing those risks so that your business looks more attractive and reliable. You can measure your progress by achieving these milestones:

• protecting what you have worked so hard for so far by ensuring that what you have built can be sold.
• Next is to structure the business operations so that you will be able to exit on your terms which ideally means no earn-out requirements.
• Now?you are in the best position to think about what intangible assets will maximise your valuation.

Reducing the buyer's risks is only one part of the equation. You also need to prepare yourself, your business, and your numbers for the exit. You need to think about these three aspects:

1. Preparing yourself for exit. Your goals and aspirations about what's next for you and the next phase of the business.
2. Preparing the business to be exit ready. The business can continue to perform without your direct involvement.
3. Prepare the numbers. This includes timing, valuation and governance.

By thinking about these three aspects, you can plan your exit strategy and set realistic expectations. You will also want to consider:

• ?When do you want to sell your business?
• How much do you want to sell it for?
• Who do you want to sell it to?

By answering these questions, you can align your project with your personal and professional objectives. You can also prepare yourself emotionally and mentally for the transition.

Remember that selling your business is not something you can do overnight. It requires careful planning and execution. You should start preparing at least three years before you intend to leave your business. This will give you enough time to improve your sellability, find the right buyer, and negotiate the best deal.

You can only do hit all of these benchmarks if you start preparing 3 or more years before you intend to leave your business.

Managing all of these risks, perspectives and considerations while ensuring that the business is not disrupted is why many business owners seek guidance and help to support them through this critical, once-in-a-career process.

Business owners who prepare their business for exit before any deal is made end up getting more money than those who don't.