Is Your Business Sellable?
December 7, 2024
What is the ultimate intent for your business? Do you know? It’s a good idea for any business owner to have an exit strategy even if you plan to keep it forever. And by the way no one keeps their business forever. Everyone quits their business one way or another.
You either sell the business, you leave it to someone like children or your spouse, you lose it in some kind of legal wrangling like a divorce, or you just shut it down and walk away for whatever reason. Or you might die and the business dies with you because nobody knows what to do with it.
Why Make It Sellable?
Whatever the case may be your business needs to be sellable even if you have no plans to sell it. How inconsiderate would it be to leave an unsellable business to your spouse and children. If the business can’t operate without you it will die and all the employees will lose their jobs and your family could be stuck with something they can’t get rid of. It could very likely cost them money and become a huge burden to them. It’s time to make your business sellable.
The sad truth is that today there are around 3 million businesses for sale and most will go unsold. The estimate is that about 70% will not sell. A large portion of them are unsellable.
What Makes A Business Sellable?
Is it consistently profitable?
The first thing that comes to mind of course is profit. Is the business consistently generating positive cash flow? If not, selling it will be a disappointing process. Not only is it profitable but can you prove it? One of the biggest problems I see when someone wants to sell their business is
poor financial record keeping. If you can't prove the amount of income
you are claiming to have then you can't get the true value of your business.
Can The Business Continue To Operate If You Are Not There?
Many business owners insist on doing more than they should be doing because they don’t trust that anyone else will do a good enough job. When a potential buyer sees this he or she realizes they not only have to replace the person at the top but they will have to hire additional people or train other current employees to perform the other duties that the owner should have handed off long ago. That will increase labor cost and decrease the buyers offer price.
Start planning now to fix that problem before you decide to sell. In the audio version of this newsletter (The Financial Momentum Podcast) I talk about a well known business figure who had this same problem and how he fixed it so his business would bring the price he was asking. Look for episode 110 coming soon.
Is there potential for growth? Is the business scalable?
Are your products and services in demand? Do you have a strong pool of customers whose problems you can solve? If you have reached a limit on how much you can grow then you will have reached a limit on the number of willing buyers you can attract. The value of your business will not be as attractive as it would be if you had a lot of growth potential. You might have to make some changes. Look at your products and determine which are the most profitable and which ones use up a lot of manhours and produce little profit. Make some adjustments. Maybe there are products and services you can add to increase cash flow. Or maybe you could expand your territory.
Leadership, Communication, And Collaboration
Do you have a strong leadership team and do the members of that team work well with each other? How about the sales team?
There is a lot at stake here that will have an effect on the business and its value. Think about team morale, productivity, efficiency, employee retention and company culture. These will all have an impact on revenue and therefore the value of your business.
These are just a few things to think about when getting your business ready to sell. If you haven’t considered making your business sellable, you should. A business that is sellable is usually more efficient and profitable.
If you own a business do yourself, your family, your employees, and your customers a favor and give this some thought.
Thanks for reading!