Team Guru Podcast with David Frizzel
5 Tips To Remember So You Can Sell Your Business
Why are you in business? What’s your plan?
I’m guessing your plan is to keep bringing in business, to be secure financially, perhaps you’re working really hard to grow and expand. And all that’s terrific, it’s the stuff every business owner spends time thinking about. But the real question is, what’s your exit strategy?
Chances are you’re the No. 1 investor in your business. Perhaps you’re the only investor, and as the responsible investor, you should be thinking about how you’re going to get your money out, eventually.
Importance of Exit Strategy To Investors
According to How To Write Plans To Win Dollars, if you’re going to get investors, you must be able to tell them what the plans are for them to exit the business.
For a lot of people, the thought is we’re just going to work in it, right? We just want it to be almost like a job. We just want it to pay us a salary, put food on the table, pay the mortgage, and have an income from it. And in fact, that, by large, is what happens with a lot of businesses.
So, to make the business valuable to someone else, it’s all about having some transfer ability. If you can have it so that your business can run without you, then you’ve got something that you can move on and sell.
You’ve also got a great business that’s going to create a fantastic lifestyle for you. You’re not just there, every day, working from dawn until dusk. You’ve created a lifestyle out of your business so that you can go on and enjoy the fruit of hard work.
It takes a while to get there.
Major Mistake: Lack of Documentation
Business owners start off with themselves and their own skill and knowledge. They make themselves so important in the running of the business that what might need to be talked about is not even part of the thought process because they are the business. The business does not run without them.
One of the reasons this is the case is that owners just don’t create systems and document processes.
In this day and age, there’s no excuse for not doing that. It is easy to be able to do it with the technology that we have at our fingertips now.
We don’t have to sit down and write out flow charts by hand. Information processes can easily be captured through videos and screenshots, then uploaded straight to a cloud system.
There’s a firm I’ve been working with. … The service manager, who was key to the business, just would not let go because he had all this knowledge in his head — he knew everything and he was really, really good.
But the business value was half of what it could possibly be because everything resided in his head.
The easy way to do it is when you’re out on the service call, you take the camera on your phone and simply record what it is you’re doing. All of a sudden, within a couple of months, you’ve got this great catalogue of information on how to fix certain things. That’s not hard at all.
5 Tips On How to Best Sell Your Business
1) Financial Order
So, if you’re going to sell your home, what are you going to do to your home?
You’re going to make the best presentation that you can possible muster.
Well, same advice for your business. You need to be able to do that. Having some really good strong financials, not with your bookkeeping all over the place, and 2-3 years of historically strong financials — being able to understand where your market is.
Is there growth? Can you actually paint a bit of blue sky for a potential purchaser? Are you reliant on anyone, not only you the business owner, but how reliant are you on your key employees or any key suppliers or any key customers for that matter?
There’s also making sure that you’ve got balances and spread there. Cashflow, what’s that like? Are you all the time scraping for money? Or have you got really good cash that’s actually in the business that you’ll be able to use for other things?
Don’t forget records of customer service — what’s that like? Today, social media is one way that people can look very quickly at to see what you’re like.
There is a whole list of “dastardly deeds” to check: carry of declining sales, dissension amongst owners, disinterest, death, forced disability, disputes, disaster, debt, disease, and destruction.
It’s a great list. It’s a terrible list. It’s a shocking list.
Have you watched those home-selling shows that are on TV all the time? You sometimes see people putting up a house for sale that is not ready.
You just sit there looking at the TV thinking, “How clueless are you trying to sell this house? You’re going to lose tens of thousands of dollars just because you didn’t bother tidying the place up.”
People who sell business are a bit the same. I’m assuming that it’s those really tidy and neat businesses that have their books in order. They have HR issues all in rows. They have processes documented. Their customers are all happy and chirping.
2) Well-Managed Client Database
Have a proper client database. Do you have that at your fingertips? Can you identify who your key customers are and how much they’re actually worth to you in the business?
If you happen to be in a café-type business, and if you had that information on who your clients are, you would be so far ahead of everybody else that you would just blow everyone out of the water. With your client database, you could generate more and more business by coming up with some good promotional ideas.
There’s a lot more you can do than just putting a sandwich board out in front.
3) Good Systems
What are the really important systems that need to operate in your business? Have you got those documented?
Are your HR systems already there at your fingertips where you can find them and everybody knows about? Do you have a process for when new employees come to the business? Think about what they do and the training they need. Have you got those systems in place to be able to make life easy for the next person to be able to take over?
It would be very impressive for a potential buyer to see that kind of information.
4) Differentiation
There must be something special about you because you wouldn’t keep getting business if you weren’t doing something that’s better.
There are things that can make you really stand out from the crowd in a service business. How about turning up when you say you’re going to turn up? That’s a point of differentiation.
You can also create this or any point as part of your culture and have it systemized. I’ll give you an example. …
I have some really big glass doors at home that I have serviced every 6 months. I’ve signed a service agreement, and the business rings me and says, “We need to come, you’re up for your 6-monthly service. Are you available?”
Blah, blah. We pick a time. I’m there. They turn up. They do the job. If they get caught in traffic and they’re going to be late or their last job has held them up, they always ring me. They have never failed to ring me.
That is a process that’s been documented and it’s in their business culture because it’s the way they do things in that particular business. So, you’ve got to find a way of bottling that for your business.
If you have a customer survey at least once a year, then you will be able to document, justify and prove that you have that reputation. That’s what you can stand for.
You’ll also see businesses sharing what they stand for through customer testimonials. That customers have been delighted with what you’ve done and the way you’ve gone about your business. If you can prove that, then that’s a great way to be able to increase value in your business.
5) Timing Is Important
Timing can make all the difference. How mature is your business and what growth trajectory is it on? If you’re in a mature market, is there some form of innovation that can be introduced that can give it another growth spurt?
Being able to look at the future market, see where the opportunities are and somehow demonstrate those —you’re going to certainly have a much better chance of finding a buyer. Timing is everything. And it goes the other way, too — pay attention to timing as when you’re willing to sell.
In Summary
Build your business with the purpose of selling so you can make some serious money and move on to something new. It’s a step in thinking big rather than just thinking survival. It’s a change in mindset. Start by having the 5 items listed in this blog in place so you can attract a buyer.
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