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How marketable is your business?
The main reason to start a business might be to sell it one day. It is the way to become really wealthy; buy (or build) businesses, make them further big and then sell them.
In general, you won't really accumulate much wealth if you only have one business. You will have to buy, build and sell a business several times to become truly wealthy.
Ideally, the only time you would want to keep a business should be if you wanted to turn it into a franchise or licensing model. However, this is a completely different situation, with different considerations, processes and requirements.
A good strategy is to hold on to your first business for the passive income it generates while you buy and build your next business. At this point, your first business should be at such a level that it runs successfully without your presence.
This then generates passive income and eases the pressure when selling, allowing you to take your time to find the right buyer and negotiate the best possible deal.
It is important to understand that you need to be a good negotiator if you are going to sell the business yourself. You are aiming for the best possible price and to achieve this, the business needs to be at a point where it is fully 'up and running'. In fact, the buyer can just move in and start earning right away.
Five key factors
There are a number of factors that affect the ability to sell your business and the price buyers will be willing to pay for your business.
These factors are as follows:
Strong consistent cash flow
One of the most important factors influencing the company's sales is its ability to generate a high percentage of repeat purchases. A regular customer base that buys from you with regularity is very valuable.
Owned assets
Here, a potential buyer will look at what assets the company owns. Be it products, registered trademarks, investments, stakes in other companies that are also part of the sale and the physical assets (movable and immovable).
People, processes and systems
Every business needs systems and good people to make sure you have a commercial, profitable business that works without the business owner.
Scalability of the business
The buyer will always want to ensure that the business is scalable so that it can get more value out of the business after the business is bought. If there is no scalability built in, the buyer has bought additional revenue but no future 'leverage' with the acquisition.
Culture of the organisation
This is often an area that is overlooked. Research shows that around 80% of acquisitions fail due to the inability to fully integrate the respective teams into one cohesive operational unit.
Start from the beginning
The key to making sure your business is marketable is to work on the above five areas from the start and develop them over time.
Too many entrepreneurs wait until the moment they want to sell and only then start analysing how 'marketable' their business is.
The reality is that many acquisitions happen when you least expect them. Or when the entrepreneur wants to transfer or sell the business because he or she wants to 'retire' and has never consciously worked towards this.
It is therefore important to work towards a sale with your business from the start. Then you will be much better prepared when a buyer presents itself and you will be able to maximise the sales price.
How we help
The ActionCOACH approach focuses on helping you build a business that can work without the business owner. Our '6 Steps to a Successful Business' model is all about this. In all our coaching programmes - both individual and group - we work with you towards this.
Kurt Vervloet
Kurt Vervloet is a business coach, blogger and speaker. Since 2017, he has been coaching businesses around the world, ranging from solo entrepreneurs, SME companies to executive management teams at large organisations. His clients choose to work with him because of my proven, no-nonsense approach to optimising and scaling businesses. By achieving great results with his clients, he has already been rewarded with several Awards.
