by Dave Driscoll
Do you want to sell your business soon? Will you need to sell your business soon?
The answer to either question can change very quickly.
So just in case, always run your business to sell!
Preparing your business to sell is not an easy task. You can preserve (or even build) business value by making a few simple tasks the norm in your daily business operations now. Then you’ll be ready for anything!
Maintain excellent corporate hygiene. This is THE most important thing you can do as a business owner. Unfortunately, I’ve met far too many owners who neglect this opportunity to build business value both now and when it’s time to sell the business.
Corporate hygiene has three main components:
1. Clean, accurate financials that tell the true story of the business.
2. Documented processes and procedures that define the “how to” of your operations.
3. Well-defined human resources policies and management.
Don’t take shortcuts on maintaining accurate, current financials! If you plan to sell your business anytime soon or not, you need to assess your company’s financials at least quarterly to look for opportunities and minimize any problems. Updated balance sheets and profit-and-loss statements are crucial to running a healthy business at every stage in the business life cycle.
Delegate, delegate, delegate. Is your business able to run smoothly without your daily input? If not, your business needs to be less owner-dependent. Invest in developing your employees’ skills and leadership potential. In the short term, delegating management responsibilities allows you to focus on growth strategy instead of putting out fires. In the long term, your business has no value to a potential buyer if it can’t run without you. The more you delegate, the higher the value of your business.
Prepare yourself emotionally. You’ve committed your time and energy wholeheartedly to your business. But you need balance; your life should not revolve entirely around your business. Explore new or neglected hobbies and passions, find volunteer opportunities that reflect your personal values, and connect with a peer network outside of your work life. Nurturing your identity beyond that of “business owner” will ensure that if/when you eventually do sell your business, you’ll be emotionally ready.
Know your industry. Be aware of the trends in your industry as well as changes in technology and society that will impact the need for your products or services. For example, I owned a company that manufactured envelopes … and then everyone started paying bills online and sending emails instead of snail mail. The market for envelopes plummeted. Keep a watchful eye toward the future and follow your instincts.
What no one wants to talk about… Our health, and that of our family, is only minimally within our control. Sadly, many businesses are simply closed because the owner (or a close family member) faces a devastating health diagnosis. Even if the ultimate outcome is good, that scare can be enough to cause the owner to re-examine priorities and decide to sell the business. None of us can predict the future, so be prepared for the worst and hope for the best.
Don’t wait until your business is in a downturn. Experts suggest that the best time to sell a business is halfway to two-thirds of the way up in the business cycle. The temptation is always to continue riding the wave in the good times, but that’s also when your business is most valuable to a buyer. Very few buyers are willing to assume the risk of a business that is in decline.
So run your business as if you were going to sell it tomorrow. Take care of those improvements you have been putting off. Upgrade your systems. Keep meticulous financial records following accepted accounting principles. Strengthen your workforce. Most business owners wait too long for the “perfect time” to sell the business and then aren’t ready when the need or opportunity arises. Trust me, you will never regret the effort you put into being prepared.
Dave Driscoll is president of Metro Business Advisors, a business brokerage, valuation and exit planning firm helping owners of companies with revenue from $2 million to $15 million sell their most valuable asset. Reach Dave at DDriscoll@MetroBusinessAdvisors.com or 314-303-5600. For more information, visit www.MetroBusinessAdvisors.com.