Run Your Business from the Start with the End Goal of Selling in Mind

Most business owners don’t think about everything that goes into selling their business until they are ready to make the transaction. They get to that point in their lives when they say “enough is enough,” for whatever reason, and they begin down the path of preparing to sell.

The problem with this approach, though, is the business might not be in the best position to sell at this point. Maybe there’s been a downturn in the economy and there isn’t a lot of money being invested into purchasing businesses in your region or industry.

Maybe after years of success, your business has lagged in recent years, resulting in lower revenue and lower profits. Maybe you just purchased new equipment and financed it over five years, or you’re stuck in a long-term lease at your building.

If you are faced with these challenges – or any other similar ones in fact – but still wish to sell your business ASAP, you may be faced with the reality that you might not get what you want out of the sale; you might be forced to accept a lower valuation than you would have hoped.

But how, then, should you approach selling your business in South Florida?

It may be a wild and crazy idea, but if you have your end game in mind when you start your business, it will allow you to capitalize on its value at its peak. In other words, start your business with the goal of selling it, and then model how you run the business in between based on what it will take to get to your goal.

The statistics are rather staggering. According to the Exit Planning Institute, a whopping 80 percent of companies that earn less than $50 million in revenue never sell their business. “That’s OK,” you might say, “I’m planning to pass my business onto my children.” That is a noble cause, but realize a mere 30 percent of family businesses actually survive to that second generation.

What happens to all those other businesses, then? The answer is they close up shop without getting any value at the end. That’s why taking an end-game approach from the moment you start a business is a good idea.

How can that be done? By focusing on four key components that make a business valuable to buyers, no matter what industry you’re in, no matter where you’re located and no matter what the economic situation of the country is.

Is Your Business Profitable?

This might sound like the most obvious aspect, but it’s worth pointing out. The most valuable businesses to buyers are those that are turning a consistent profit. These businesses can provide a return to buyers right away without any work being done. With a little change here or there, the new owner might be able to increase that profit, too.

Is Your Business Competitive?

This is a key component most potential buyers will analyze next. It’s nice to be profitable, but that could be a relative measurement. If a majority of businesses in your industry and region are profitable, but you lag significantly behind your competition, you won’t be as attractive to buyers. It’s important you build some differentiation into your business to be more attractive to buyers.

Is Your Business Scalable?

Most people who buy businesses aren’t content with how the business is operating today. They want to be able to grow the business for larger profits in the future. At the same time, it’s important to be scalable the other way, too. If business lags at one point, can the new owners easily downsize without catastrophic consequences while they are trying to weather a storm?

Is Your Business Sustainable?

This is the last point, but it’s perhaps the most important one for buyers. Is your business built to last? Or is the product or service you offer now going to be in demand for years to come? If it’s not something that will last for a while, then there is no true value to buyers.

By planning your entire business from the start around an end goal of selling, you’ll be best positioning yourself to capitalize on your investment. Even if you become a part of the small 30 percent of family businesses that survive to a second generation, running your business in this fashion will only be positioning your heirs to take over a healthier, more profitable business.

Talk to a Sunbelt South Florida broker today! Sunbelt Business Brokers of West Palm Beach provides dedicated business brokerage services for all of your selling needs.

Whether you are an established business owner nearing retirement and looking to sell, or an ambitious entrepreneur seeking your next investment opportunity, there is no reason to look beyond Sunbelt Business Brokers. Visit us at 800 Village Square Crossing, Suite 216 Palm Beach Gardens, FL 33410 or contact us at (561) 832-9222.