As a business owner, if you think that one day you may want to sell your business, one of the things you need to consider is how do you maximize business value so your business will be attractive to a buyer. One may think that maximizing the value of a business sounds like a simple proposition but that is not necessarily true. You will need to determine areas that need help and dedicate resources of both time and money to make it happen.
The following are the steps needed in order to begin down the path. Doing this will result in you reaping the rewards of your life’s hard work when you wish to exit the business.
1. Remove yourself from the day-to-day operations
Recognize that you are going to have to dedicate resources including your own time to make this work. You will need to transition your focus from running your business to focusing on growing the business.
To turn a business into a salable asset, you need to put time, effort and resources towards structuring the business such that the business owner doesn’t need to be there running day-to-day operations. If the business needs you there, then you don’t own a business. You have a job.
If you try to sell the business someday, there may not be anything to sell because you are the business. So the first step in creating a business succession plan is to put the systems and structure in place to help you move into a more leadership role.
2. Consider the various exit strategy options
Going through the process of readying your business to sell takes work and resources. Many business owners don’t have the energy to go all in or are unwilling to invest in the consultants needed to assist with the process.
If this is the case, you should consider just getting what you can for the business someday or half-retire.
Half retiring is a system where you decide you are not selling for whatever reason but are setting the business up to run on its own for stretches of time so you can take time off to enjoy life. This is becoming more common among businesses because:
- Often times the multiples don’t justify the sale of the business
- The business owner doesn’t want to dedicate the resources to make the business salable
- The investment needed to make the business salable isn’t worth the risk. This is especially true for small business owners.
3. Hire functional experts
If you are willing to invest in taking the business to the next level, the next step is to hire experts in areas where you may lack experience. You need to invest in the right employees and/or consultants to help grow the business beyond what you are capable of doing on your own. This is where resources and a significant monetary investment are a must.
For many of the smartest people who have started a business, building the organizational structure that can maximize the value of the business is the most difficult. Whether it’s your ego or lack of knowledge, getting the right structure in place to help scale the business is where many fail.
Unfortunately, a business can only grow into a salable asset when the owner steps aside and lets other experts take the reigns of their respective areas of the business.
4. Formalize systems and standard operating procedures
Creating systems in your business helps you remove yourself from the day-to-day operations. If your business runs from the processes in your head, you need to get them documented so that you can hire someone to take over the process.
Documenting your processes can be as simple as you recording yourself doing something and having someone transcribe it into a document. Or you can hire an operations person to set up the systems and document them with you.
Either way, in order for your business to grow, you need systems that standardize how you run your business.
Is it worth the investment?
You’ve spent years building this business that served you well. But as you consider retirement, you don’t want the business to just stop. And depending on the type of business you are in, you have to think about your clients and customers and how they will be served in the future.
Investing in the growth of your business is like any other type of investment. Sometimes you are rewarded for the risk you take and other times you are not. You need to be able to quantify the risk of making the business a salable asset against whether you can handle the financial loss if you are not successful.
Learn more about the steps you need to take to ensure your business is ready to sell by listening to our podcast.