What Makes a Business Saleable?

Burnout and boredom are two reasons for owners of small businesses to sell their business, however retirement is perhaps the most common.

When the time comes that you want to leave the world of work behind, if there is no one suitable, or willing, to take over your business, then the best option is to sell up.

Identifying why you want to sell, will help you to determine how best to proceed, whether you’ve been in business for decades or just a couple of years.

Why do you want to sell and why your reason is important?

It’s all about trust.

Whatever the reason, it’s important that?potential buyers believe your cover story, or they’ll immediately become suspicious.

So, to ensure the buyer trusts you, first and foremost, be upfront about your reasons.

What makes a business saleable?

To make a business more saleable you need to be able to demonstrate the following: a good profit track record, solid financial information, an actionable plan for growth, defensibility of a niche, brand, quality management team, and, where relevant, intellectual property

A big thing to remember is, if the business doesn't function without you, this will impact the interest of potential buyers.

So what makes a company saleable?

1. Financials and Growth Potential

Having a track record of strong financial performance with focus on profit, is important. However, a buyer will look at future growth potential, i.e. a company that has the ability to scale and has positive cash flow. Companies of most interest to potential buyers are those that can finance their own growth internally.

2. Reducing Over Dependence

Reducing your over dependencies is key to make your business saleable.

Having a small number of customers that account for the majority of your revenue can be a red flag for a prospective buyer.

Or over reliance on one or two suppliers, can have a similar negative impact.

The same happens if your operations are driven by people instead of systems and tools. Over reliance on one or two members of staff including the owner, could be another red flag for a prospective buyer.

3. Increase Recurring Revenue

Companies with recurring revenue and high retention (both customers & employees) attract buyers looking for long term, low risk ventures.

Recurring revenue streams include service contracts, multiyear tenders, subscriptions, etc.

4. Unique Value Proposition

A commodity business will bring low value due to low margins. Only a clear competitive advantage can warrant premium pricing and create barriers to entry. If your competitors can't match your differentiation without investing time, money and effort, this will help increase the level of interest in your business.

Look at how you can protect your IP, brand equity and increasing barriers to entry.

5. Having Processes & Systems In Place

Having a business that thrives without you, includes identifying and establishing processes and systems that will deliver high quality customer experience independent of the individual providing it.

Define the key processes and the steps to follow, identify best practices; document each step; communicate it and ensure that the processes are implemented as stipulated.

This is also a key element of the franchising model.

6. Motive and Manage Your Staff

As business owner, you are responsible for the direction of your own company. You are in charge of?creating and managing your business plan, developing and implementing the strategies to achieve your business goals, and coming up with ways to keep the company competitive and profitable.

Developing a culture that reflect you and your business values, keeping your team motivated and performing at their best, will depend on your leadership skills and managing style.

Building the right culture is a key element in developing a business that thrives without you.

A business that thrives without you, is an attractive business for potential buyers.

sources:

https://www.inc.com/kevin-daum/8-factors-that-make-a-company-more-salable.html

https://morganandwestfield.com/knowledge/business-exit-plan-strategy-checklist/