It feels like you’re building a great business. You have great products, loyal customers, good revenue and strong profits.
However, a curious thing happens if you try to sell your business at this stage. Unlike your customers, who love you, potential purchasers are a lot less enthusiastic once they have had a good look at your business. It’s almost like they are blind to the obvious value you have created in your business.
And here’s the thing. You probably have created value in your business. But there is a subtle and critically important difference between creating value in your business and building a “highly sellable” business.
Build to sell
One of our key strategies for achieving a smart business exit is to build to sell. In our next few posts we will be looking at how to package your business value in a form that makes your business highly attractive to potential buyers.
There are 3 key things you should think about as you start implementing your build to sell strategy.
1) Think like a buyer
To get a good feel for what makes a business “highly sellable” you need to put yourself in the shoes of your buyer. When a buyer is on the verge of buying your business they have two words buzzing through their head: opportunity and risk. What value will they gain from buying your business, and what risks are involved in buying it?
So your build to sell strategy is essentially about how to package your business value in such a way your buyer can easily derive maximum value from it with minimum risk.
It’s therefore in your best interests as a seller to make sure you really understand how to make your business as valuable as possible for potential buyers and how best to give them comfort that the risks attached to the opportunity have been minimized as much as possible. The important thing about risk is that buyers will always look to discount the potential sale price to take account of the level of risk they think they may take on in buying your business – and they will always allow a generous amount for this.
As a seller you are in the fortunate position – if you act early enough – to be able to do a lot to maximize the value of your business for your purchaser and reduce their potential concerns in relation to risk.
What constantly surprises me is the number of business owners who don’t take advantage of the opportunity prior to sale to deal with these issues – which are often not significant – to achieve much better business exits.
2) Imagine your business as a product
One concept we find very useful, particularly if you are looking to sell to a much larger business, is to think of your business itself as a product.
Although this might sound a little strange, think about it from a potential buyer’s perspective. The reason many larger businesses buy smaller ones is that they want to add new products or services to their current range to increase turnover and enhance growth. So, from their perspective, it really is like buying a new product. And if that’s the case, they want it to be as simple as possible. They want to just slot your business into their existing product or service range as seamlessly as possible with minimal risk.
Now think about your business again as if it was a product:
- Is it well made?
- Is it attractively packaged?
- Does it come with clear instructions?
- Does it function properly or are you still working on parts of it?
- Are there any bits and pieces that come along with it that a customer might not want?
If you can get your head around this concept of thinking about your business as a product it will help you enormously as you work on your build to sell strategy.
3) Who else can help you build to sell?
Building initial business value requires significant entrepreneurial input. And this usually comes from you as the business owner.
The good thing about implementing your build to sell strategy is that you can get a lot more people involved in helping you implement it. In fact, it’s critical you do.
For high-growth businesses in particular, this is often the point at which they either rapidly progress or fail. The main reason is that more entrepreneurial business owners (who are often brilliant at developing a business’s purpose, vision and growth drivers) often struggle with the discipline and structures needed to take their business to the next level. Many also struggle with allowing other people to take more significant roles in their business as it develops.
Now is the time to look closely at what skills and expertise are needed to take your business to the next level and get other people involved in your business to provide those skills and expertise.
So how sellable is your business to a potential buyer right now? Take the complimentary Value Builder Score via our website to find out.