Posted On July 9, 2021 by Brentwood-growth
Deciding to sell your business is a big decision, but preparing the business for the sale can sometimes take years. There are many factors that must be considered and executed to be certain that the sale will hold up in the due diligence process, and that the highest sale value is obtained.
One of the hardest issues we must deal with when selling our business is pulling back from the day-to-day operations of the company. This can be a very difficult process, not only because of all the blood, sweat and tears we’ve put into it, but also because this has been our lifestyle for many years – working at all hours and wearing many hats whenever necessary. We will have a hard time relinquishing control and may believe that no one can perform certain functions as well as we can.
All of these factors may be true, but the problem is – if we are truly the only one that is able to run our business, we can potentially harm its value. Try to see this from a potential buyer’s perspective: if everything runs through you, the owner, what happens to the business when you are no longer there? There is tremendous risk from a buyer’s viewpoint with this and they will want to discount the price of the business as a result because In order to sell this business you’d have to find someone exactly like yourself with the same skill set, but 25-30 years younger. And that’s like finding a needle in a haystack.
You, as the owner, must identify what your personal objective for the business is. If it’s a cash flow and lifestyle business, then you may never need to sell it. If you want to prepare the business for a future sale, then you need to develop a process and a team where the business will flourish without you. It is counterintuitive to some degree. Major functions and areas of responsibilities need to be handed off. Your ultimate goal is to become redundant and replaceable.
Below are suggestions as to how this might be accomplished over time:
Remember that the objective is to maximize the value of your business for a sale. Building a scalable business that can run without you is one area to consider. This is what buyers are looking for because it reduces the risk upon your departure and allows the highest sales price. Keep the end game in mind.