The hidden goals of the smart business owner
What are your business goals for the year? If you’re like most owners, you have a profit goal you want to hit. You may also have a top-line revenue number that’s important to you. While those goals are important, there is another objective that may have an even bigger payoff: building a sellable business.
But what if you don’t want to sell? That’s irrelevant. Here are six reasons why building a sellable business should be your most important goal, regardless of when you plan to push the eject button.
1. Sellability means freedom
One of the fundamental tenets of sellability is how well your company would perform if you were unable to work for a while. As long as your business is dependent on you personally, there’s not much to sell. Making your company less dependent on you by building a management team and creating just-add-water systems for employees to follow means you have the ability to spend time away from your business. Think of the world of possibilities that would open up if you could choose not to go into the office tomorrow.
2. Sellable businesses are more fun
Running a business would be fun if you were able to spend your days on strategic thinking and big picture ideas. Instead, most business owners spend the majority of their day on the minutia: the government forms, the employee performance reviews, bank reconciliations, customer issues, auditing expenses. The boring details of company ownership suck the enjoyment out of owning a business—and it is exactly these tasks you need to delegate into someone else’s job description if you’re ever going to sell.
3. Sellability is financial freedom
Each month you open your brokerage statement to see how your portfolio is doing—not because you want to sell your portfolio, but because you want to know where you stand on the journey to financial freedom. Creating a sellable business also allows you peace of mind, knowing that you’re building something that—just like your stock portfolio—has value you could choose to make liquid one day.
In order to determine the growth of the company, an important factor is a measure of equity at regular intervals. Annually or perhaps every two years is sufficient for most small businesses. There is a difference between the book value of equity shown on the tax return and, “Market Value Equity.” A trained business broker should be able to assist you with this.
5. Sellability is a gift
Imagine that your first-born graduates from college and as a gift you give him your prized 1967 Shelby Ford Mustang. Your heavily indebted child takes it on the road, but after a few miles, the engine starts smoking. The mechanic takes one look under the hood and declares that the engine needs a rebuild.
You thought you were giving your child an incredible asset, but instead, it’s an expensive liability he can’t afford to keep, nor can he sell it without feeling guilty.
You may be planning to pass your business on to your kids or let your young managers buy into your company over time. These are both admirable exit options, but if your business is too dependent on you, and it hasn’t been tuned up to run without you, you may be passing along a jalopy.
6. Nine women can’t make a baby in one month
There are some things in life that take time, no matter how much you want to rush them. Making your business sellable often requires significant changes and a prospective buyer is going to want to see how your business has performed for the three years after you have made the changes required to make your business sellable. Therefore, if you want to sell in five years, you need to start making your business sellable now so the changes have time to gestate.
Are you curious about how sellable your company is and what you would need to tweak to sell it when you’re ready? Call us at (207)774-7715.