If you own a business then you know that proper planning and setting goals is key to keeping your operations running smoothly. But did you also know it’s the best way to form your exit strategy? Many business owners are experts in running their business day to day, but end up unprepared when it comes time to sell their business.
One of the most important questions that a buyer is going to ask is, “is there a plan in place for your exit?” Making sure you have a supportive management team and a stable transfer of power from the business owner is one of the biggest obstacles to the success, or failure, of a business ownership change.
– Christopher Snider, CEO of Exit Plan Institute
In relation to the first question, having an independent marketing process that doesn’t rely on your contacts or performance as the owner of the business is very important to the sustainability of a company’s performance. Marketing is essential to growing your business value, building brand awareness, and optimizing sales. If these operations are tied to you as the owner, the buyer is going to view this as a huge risk and might not be keen on purchasing. Consider hiring an outside marketing firm that is reliable for the long term or creating an in-house marketing department before deciding to sell.
When buying something, the risk must be equal (or preferably less) than the reward. The buyer is going to look at all of the risks associated with your business; one of the main ones is your revenue. Reducing the risk to your revenue can be done in many different ways, but two of the most basic options are diversification and consistency.
It is in your best interest to diversify your vendors, your services or products, and your delivery channels. What that means is if a food vendor has a spoiled batch, you should have another vendor you can call up, or if one of your delivery channels has a delay in their supply chain, you have other options to get your product or service to your customers.
Additionally, having a consistent flow of revenue is valuable in the event of an off-season or in emergencies – say, a pandemic for instance. This consistent income can come from subscriptions, contracts, a monthly/recurring service, or a product that is consumable. Keep these things in mind when creating your product offers and your forward/backward integration.
– James Carbone, Electronics SupplyChain Expert
The main concern for every business owner is to beat competitors. This is also true when it comes to selling your business. Buyers are also looking at your industry’s competitive landscape when it comes to purchasing your business, not only as they are going to have to join in the fight to keep the business relevant but also to determine which business to buy.
They will be much more likely to buy your company if you already have a niche consumer base and a unique product or service that is difficult for competitors to emulate. This could also mean being in a good location with little to no competition or little competition for the ownership of intellectual property or licenses/patents because IP protection issues can derail things in the due diligence review process. For sellers, it is wise to address IP issues well before the business is offered for sale.
Lastly, the organization of your business is another important factor in determining its value. The less work the buyer has to do after the purchase, the better. Having a list of operational procedures in place laid out in a way that is easily teachable for new staff alongside a skilled labor force is a great way to have continuity. The same goes for business operations – if your accounting and inventory are kept in good order and are easy to understand, the buyer will feel much more confident about the value of your business.
Hopefully, this list gave you some insight into areas of strength in your business that are already adding value, or perhaps you can take note of some areas that may need some help before it’s time to sell your business. We highly recommend creating an exit strategy plan now to fully prepare for the successful future of your business.
Here at Advanced Business Brokers, we specialize in brokering privately owned businesses, and we advise on exit plan strategies for all varieties and sizes of businesses. Contact us today to work on building the value of your business and getting you prepared for a sale in the future.
If you’re thinking about selling your business and don’t know where to start, consider speaking with our team here at Advanced Business Brokers. We specialize in brokering and advising exit plan strategies for various sizes/sectors of businesses.
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