Even if you’re not thinking about it today, selling your business should be part of your long-term plan. Eventually, your business will change hands, so keeping it “sale ready” ensures a smoother transition when the time comes.
Consider the following questions to assess your readiness for a future sale. They’ll help you identify your strengths and areas for improvement, setting you up for a successful sale when you’re ready.
Is your business profitable?
Buyers are drawn to businesses with strong financials, making the bottom line essential. Profitability also depends on the business’s age and revenue trends. While short-term success may seem impressive, long-term growth with steady revenue increases is more appealing to buyers.
If your business isn’t performing optimally, buyers may see the potential to transform it. Be mindful of areas where profit is lost and how buyers will view the business objectively. Buyers will ensure the business has a positive net worth and no excessive liabilities they would inherit with the purchase.
Where do you stand in the market?
A sale-ready business maintains a strong competitive position and market presence. Regularly update your competitor analysis in your business plan to stay aware of new market entrants. This ensures a potential buyer doesn’t discover competitors offering products or services that once set you apart as a USP.
How much of the business success is dependent on you?
A prospective buyer will want to ensure the business operates smoothly, with or without your involvement. While being a hands-on owner might seem advantageous, a business heavily dependent on the owner can be a buyer’s concern. Independence from the owner indicates a more sustainable and scalable operation.
If your unique skills drive the business’s success, this may pose a challenge for buyers after your exit. To address this, staff training and development should be implemented to ensure continuity. Consider setting contracts for key team members and planning a transition period. It ensures continuity and helps the business succeed without your direct involvement, making it more attractive to potential buyers. Keep an eye out for things like brand imagery. Some businesses incorporate their founder’s image and message into their logo. If you plan to exit, consider how this will impact your business when it’s in new hands. This can have knock-on effects on customer loyalty.
Why will they buy?
There are many reasons that someone may consider purchasing a business. You should become familiar with the kind of buyers you’ll encounter and what they might be looking for.
A buyer may target underperforming or overlooked businesses. Seeing an opportunity to “flip” them by improving operations or revamping products and services to create profitability.
Competitors may see your business for sale as an opportunity to increase market share or expand into your location. With their market knowledge, they can identify what’s working and leverage your established success to grow their operations.
In this sense, there’s no reason not to plan for a sale-ready business across your time as an owner. Keep that frame of mind of how an outsider might assess your business.
In the next part of our Sale Ready series, we’ll discuss how to maximise your business’s value and make it more appealing.
Key Takeaways
- Selling your business should be part of your overall business strategy.
- Buyers are drawn to businesses with strong, consistent financials.
- Stay competitive and regularly update your business plan to maintain a strong market position.
- Reduce reliance on the owner by training staff and implementing key team contracts.
- Buyers may seek opportunities to improve underperforming businesses or increase market share. Understanding their motivations will help in planning a successful sale.
