Do you expect to sell your business at some point? The truth is that only about 20% of those that attempt to sell their business will be successful. While owners spend much of their life growing their business, most FAIL to incorporate a strategy for building a business that is suitable for sale. Throughout my years observing and consulting with small businesses, I have noticed a vast difference among owners in their preparedness for exiting their business.
I recently read an engaging book by John Warrillow, Built to Sell, that confirms some of my observations of businesses. This article addresses only three of several very important principles that can help owners grow a business that is suitable for sale.
Principle 1: Grow a management team. Who gets the customers, oversees the sale, manages fulfillment and makes the decisions? If the business is dependent on you, there is no business to sell. A buyer wants to know the business can run successfully without you. If you can go on vacation for a month and the business just gets better, then there is a good chance you have something to sell.
Principle 2: Focus on what you do best. It is very easy for the business to get spread too thin as owners are distracted from what they do best in hopes of capturing a little extra revenue. No business can be everything to everybody. Business that are focused on being the best, delivering superior products or services will find that they are able to differentiate themselves from their competitors. It is better to excel at delivering a few products or services than providing a wide range of average quality products or services.
Principle 3: Redesign services to be products. If your business is service oriented, look at crafting the service such that is more product-like in nature. In his book Built to Sell, John uses the example of changing the designing of a logo from a service to that of a product. The principle advantage of this change is the impact on cash flow. People are used to paying for products up front – phone, computer, toothpaste, etc. and services after the fact – cable, phone service, tax preparation, etc. I recently suggested that the owner of a small newspaper consider that her ads were a product rather than a service and that she have her customers pay up front rather than billing them as was her current practice. The difference is about 60 days improvement in cash availability and the elimination of almost all of her accounts receivable. Why should she print the ad only to have a customer not pay or pay 60 days after the ad has appeared?
This article has presented three tips to help business owners grow their business such that it is suitable for sale. I encourage you to read Built to Sell, a very entertaining and readable book, for a great many other tips on crafting a marketable business.