In our last blog we introduced our build to sell strategy for achieving a successful business exit. The key aim of the build to sell strategy is to package your business value in a form that makes your business highly attractive to potential buyers.
The power of the strategy is that this maximizes business value for your buyer. While there are quite a few things you can do, here are the 4 things that usually ensure your buyer gets the maximum benefit from the value you have created in your business.
Reduce reliance on you as business owner
While it seems counter intuitive, reducing reliance on you as business owner is a key driver of business value for a potential buyer.
One of the biggest fears buyers have when buying a business is they will effectively end up buying just you, the business owner, not your business.
And it’s a very real concern. In a lot of businesses, particularly smaller businesses, owners are heavily involved in all significant aspects of the business – they develop their products or services, make all the key decisions and manage key customer and supplier relationships.
No matter how well you do these roles, potential buyers want to know they are buying a business that can successfully operate independently of you as business owner.
Build recurring revenue streams
One of the key areas to focus on in building value in your business for potential buyers is the nature of your revenue streams.
Most businesses focus on overall revenue, but only a few really focus on the nature of their revenue streams. Buyers, on the other hand, are very interested in the types of revenue you earn. And the sort of revenue buyers like most is annuity-style revenue (that is, revenue that is virtually guaranteed to turn up for them in the future once they have bought your business).
Building recurring revenue into your business adds substantial value from a buyers perspective.
Minimize reliance on particular suppliers, customers and employees
Reliable suppliers, customers and employees are great – they are so good to deal with, so reasonable and never cause issues.
But, they are a mixed blessing for business owners when they come to sell.
Despite all their good features, if you become overly reliant on particular suppliers, customers or employees they will detract from the value of your business in the eyes of a buyer. While a potential buyer will like your great suppliers, customers and employees, they also want your business to be robust, and will value it more highly if it is.
Develop high customer satisfaction
Most business owners would readily agree that it’s important to have satisfied customers.
What is less well appreciated is how having satisfied customers can significantly add to the value of your business.
In our next post we will look in more detail at how reducing reliance on you as business owner and building recurring revenue adds value to your business for potential buyers.