Keep these points in mind as you plan your exit strategy:
1) Understand what it means to build a desirable business. Building a business with the intent of later selling it is an intensive process. Every policy, work process, and employee position needs to be created with consideration for the owner/manager who will eventually replace you at the head of the company. You might consider reading “Built to Sell,” a book by author and entrepreneur John Warrillow chronicling the trials and tribulations faced by a business owner attempting to reshape his organization in order to boost its market value in the eyes of his prospective buyers. If you’ve never sold a business before, let alone structured one for sale, the book will really highlight just how pervasive the necessary changes often are. I view it as a sort of literary pep talk to get your management and leadership juices flowing. They will definitely come in handy throughout the transition process!
2) Make your business less dependent on you. This should go without saying; you plan to leave the business after all. What kind of value can you hope to get for your business if your prospective buyer expects the whole thing to fly apart once you’re gone? Establishing effective, easy to follow work and management processes will go a long way to improving the perceived value of your business by standardizing your day-to-day activities and making them more teachable for not only employees, but the new owners as well. You should be anticipating how you can reduce future headaches for the incoming manager and also be prepared to stick around for a while after the sale as a trainer and consultant while the new owner(s) get situated.
3) Don’t rely on only one client for a significant portion of your revenue. Opinions vary but 15% is a decent benchmark to try and adhere to. You don’t want your business’ revenue picture to rely too heavily on one specific client. This can make a prospective buyer nervous about the company’s income situation especially if they think your big client stays with your business because of their relationship with you. One is reminded of the old adage involving eggs and baskets... A diversified income stream reduces perceived risk for the buyer.
4) Create incentive plans to keep your key employees around during and after the transition period. This point dovetails with #2. By definition if your business isn’t dependent on you to operate smoothly you rely on competent management to, well, manage operations in your absence. An effective management team is something you can advertise to your potential buyers and is a big feather in your cap if you can guarantee they’ll stick around when the new owner takes possession. “Turn Key” businesses can demand a premium compared to other businesses on the market. (For but one example of a Long Term Incentive Plan for employee retention see here.)
5) Find a good business broker. For me, this definitely goes without saying. As business brokers we are capable of leveraging numerous assets to better promote your business. Brokerages maintain inventories of businesses for sale and are thus destinations for prospective buyers, meaning we can shop your business around to a far wider audience than you could probably hope to manage. Because we are capable of generating more chances to attract the right kind of buyer we brokers are more likely to find the “right fit” for your business within a specific timeframe. Not only that, by doing what we do best – selling your business – we can take a load off your shoulders and let you keep doing what it is that you do best; running your business. (For a much more detailed explanation of what a VR Business Broker can do for you click here.)