Do this to increase your chances of success in selling your business
We become entrepreneurs for various reasons. To earn a living, to have more flexibility, and to have a fulfilling career. Regardless of why you get into entrepreneurship, there will come a day when you consider selling your business.
However, just because you are passionate about your business, that doesn’t mean potential buyers will feel the same way. After all, not everyone feels the same way about your business as you do. In fact, 80 percent of business owners aren’t able to sell their businesses. Furthermore, the majority of that 80 percent fail to sell their businesses in a year.
Here are some tips to make your business attractive to buyers, and maximize your chances of selling your company.
1. Bring out the value.
Depending on the role you play in the business as the owner, you need to show that your business can be successful without you. It’s important to show potential buyers that the business can run without a single person.
I spoke with Kosi Stobbs, CEO of Owl Group Companies, which operates several eight-figure companies. Kosi shared that this is one of the first things a smart buyer will consider when evaluating whether your business is worth purchasing.
This can be difficult when you’re emotionally attached to your business, but you have to put yourself in the shoes of the buyer.
2. Show off your numbers.
Investors appreciate a powerful story. But they communicate in numbers.
When business owners try to avoid talking about their numbers, it’s a red flag to buyers. Be prepared to answer potential buyers’ questions about costs and margins, and dive into the details.
Chances are, the person you’re speaking to will understand the finances better than you do. Be transparent about the good and bad parts of your operations. It’s better to build trust by sharing everything upfront than to have the buyer find out about it during due diligence.
If there’s no trust, there’s no deal.
3. Diversify your customer base.
You don’t want one customer making up more than 15 percent of your total revenue. For example, if your business offers different products and services, then be sure to sell those products and services equally.
Additionally, working with a blend and a diverse customer base with different profiles, needs, and budgets will make your business more valuable not onlyto customers, but also to potential buyers.
4. Consider how much time you spend.
The less time you spend operating the business, the better. Owners do not want to spend a ton of their time operating the business, especially if they own and operate numerous companies like Kosi.
Think about all of the ways you can streamline or automate parts of the business. This could be leveraging automation tools or training cheaper labor to do the same things you’re doing today.
Once again, be conservative when sharing how much time you actually spend on the business.
In the downturn economy we are all facing, just surviving will show buyers the resiliency of your business to navigate through tough times.
Whether you have been a business owner for 10 years or 10 months, be sure to keep your end goals in the back of your mind. Your business plan and strategy should include long-term goals, which might mean an exit strategy.
Regardless of whether you want to sell or not, focusing on executing these tips should improve your business. Besides, you never know when a potential buyer may come knocking on your door.