For some entrepreneurs, selling their business may seem like a far-off dream or a goal for the future. But the most savvy business leaders will build the company with a plan to sell in mind, even if the sale will take place 10-20 years later.
In some instances, the preparation process can take up to three years from start to finish, therefore leaving this vital step to the last minute will cause you to panic about time and even potentially cause you to rush through the process. This can lead to not getting the sale price you deserve after all of your hard work. Below, we break down four top tips for making sure you get your planning spot on.
- Continuously monitor the value of your business
As you grow the business and earn more revenue, it would make sense that the value of your business goes up at the same time. Continuously monitoring this until your business is valued at the amount you are looking to sell for can help you know when to sell. It’s also a nice opportunity to see how far you have come!
There are a few ways that you can value your business yourself, such as through calculating your Asset Value or EBITDA multiple, but getting a free business valuation from a professional can actually surprise you with how much you could gain!
- Use your staff wisely
Your staff are there for a reason – to keep the business running efficiently, even when you’re not there. So why would this be any different when you’re ready to move on? Make sure you’re not indispensable and start to delegate some of your responsibilities to your more senior staff. Documenting key processes will help greatly with this, especially if some of your staff plan to move on eventually too.
A business that is too heavily reliant on its owner for day to day operations may be valued lower, as the handover process is likely to be lengthier and more difficult. So, from the very start, it’s a good idea to make sure your staff are in the know about the ins and outs of your business and can carry on your hard work.
- Make sure you’re covered
Risky actions can have disastrous consequences. Making sensible decisions, such as making sure you have business insurance, can protect you in the event of future accidents. Potential buyers will also want to see these documents – not having them can be the reason a sale isn’t followed through!
Make sure that you also have contracts signed on the dotted lines with your clients. Without this, some may want to stop working with you as soon as they hear that you are selling, which can lead to lost business for the new owners and even complications with contract law. Making sure you have plenty of diverse clients on your books to avoid this.
- Consider other options
If, further down the line, you realise that you don’t want to sell your business to a complete stranger, a management buyout can often be a great way to pass your business on to the management team. These people already know the business inside out and have the skills and passion to take it forward.
This can also be great for the team themselves as this option can be more financially rewarding than a typical salary or bonus. It is a great opportunity for the team to be truly rewarded for all of their hard work.
Building a business with selling in mind will serve you in the long run as you will be prepared for when it does eventually happen. This can help with getting the best sale price possible – what business owner doesn’t want that? Start planning today to secure your future.