So you’re thinking about selling your business.
That’s great news! Even if you’re not thinking about selling your business for some time or you’ve never thought about selling your business, it’s important that you put thought into… ‘If I was going to sell my business, what would I get for it, and what would maximize the amount that I get for it?’
Because there are too many people out there selling business and asking way more than what they should be because the business itself is not a great business. So I’ve got six tips to help you get clearer on what it is you need to do to be more successful when selling your business. Like I said before, even if you’re not thinking about selling your business right now, you could definitely put these things into your business now to help it get ready for selling your business in the future. And if you didn’t sell your business, you're still going to benefit greatly from it.
Tip #1. Make Sure it is Profitable
My first point is to make sure it’s profitable. I see a lot of people sell their business when it’s not working. Not the time to sell a business, let’s face it. If I’m out there looking for businesses to buy, the last business I’m going to buy is the one that doesn’t work.
I know you’ve got yourself in a situation where you’re in a business and you’re above your head and you can’t operate it. If you’re asking for money for that business over and above what’s reasonable, you’re not going to sell it. It’s like a house. Houses sit on the market sometimes for months and months at a time because they’re overpriced. Business are not different. The thing about businesses is it’s easier for people to see they’re not performing or they’re not worth the money than it is with a house. Houses it’s pretty easy, but it’s even easier with a business because all your income has to be recorded, your expenses have to be recorded, which means someone can quickly work out, ‘Is this business profitable or not?’
So you want to make sure that your business is running well and is profitable. Not running at a loss. Now if it is running at a loss and you want to sell it, just don’t expect top dollar for it. It’s like buying a house that’s really run down or needs demolished. You’re not going to get top dollar for it. So if it’s running at a loss, and you’re at a loss with what to do and your last ditch effort is to sell the business, be reasonable. Don’t ask for more than the asset value. Even then, you’re not going to get retail asset value because that’s just not how it works. Everything is depreciated. You’re going to expect to get half the asset value when you’re out of there. Be thankful that someone’s willing to take the liability off your hands, because that would probably be a lease or something like that. So make sure your business is profitable if you want to maximize the sale price. In a lot of cases, they’ll determine the sale price/buy price on a number that’s a multiple of your profitability. Make sure you’re profitable.
Tip #2. Have a database of customers
Have a database of current and past customers and also prospects, if you can. There’s great value in a database. It takes years and years to build a solid database. If you’re not building a database in your business right now, just go and buy something to do it. For 100, 200, 300 bucks a month you can get a fantastic online program that you can use in your business to collect everyone’s details. You can tag everyone when they buy from you, all sorts of stuff. If you’re in retail, for example, there’s point of sale systems that do all of this for you. When a prospective buyer comes to you, if you could say to them, ‘Hey, here’s a database of ten thousand people that have bought from me in the last ten years. Here’s another thirty thousand that bought from me in the last five years but haven’t heard from since. Here’s another thousand we’re targeting but haven’t bought from us yet,’ whatever it might be. If you’ve got a good database, it’s going to add dollar signs to your price when it comes to selling your business. It adds a huge amount of value because now they’re not just buying the good will, they’re buying the opportunity to grown the business to the next level.
Tip #3. Sytemize
No one wants to buy a business that’s just a difficult job. If your business relies on you to run it, it’s going to be very difficult to convince someone to buy it from you because they’re not going to know what to do, especially if they’ve never been in your industry before. Let’s use an example everyone can relate to. Say you’re a plumber and another plumber buys your business, that’s different, right? They’re buying your phone number, your current run of clients, your equipment. It’s a bit different. But let’s say you own a cafe, and the people who are coming to look at buying your business off of you have a redundancy package from where they were working, and they’ve decided they want to step out of being employed and move into entrepreneurship and try their hands at running a business. If your cafe is completely systemized, there’s an SOP (standard operating procedure) essentially an operations manual that they can at least look, here’s how we order something, here’s how we make something…
If they’ve got a set of operating procedures, then you’re always going to get more for your business because it’s easier for someone to adapt and run that business by looking at the systems. That’s why something like a McDonald’s store… it’s just a burger joint. But it would command a fairly high sale price because it’s so well systemized.
Tip #4. The business works without the owner
Which leads me to point four, if it’s really well systemized, it will work without the owner, and this is where you’re really going to maximize the money you can get for your business. If the business is truly an investment for an entrepreneur to be able to invest in, and they don't have to work in the business because it’s that well systemized, then you’re really going to maximize the dollar you’ll get when you’re selling your business. So if you can get it to the point where it’s systemized and it works without you, you’re going to maximize your sale price.
Even if you’re in a position right now where you’re working in the business and you’re thinking, ‘Geeze, I’d like to sell,’ but you could hang in there for a year or two and systemize it so you don’t have to be in the business, I would suggest doing that. Because the amount of money you’ll make in addition in two years time by doing that will pay you far more than you’d earn doing anything else. It’s a very valuable thing to do in your business. That was number four.
Tip #5. Have a Marketing Plan
One of the biggest fears people have when they get involved in their own business is where are they going to find their new clients. So people need to know that they can find clients in a predictable fashion and that you’ve had marketing that’s been proven to work. So you’ve probably run a whole bunch of marketing to get it to this current point, and there are certain things you’ve done that have worked. You should document those!
Put them into a plan so that you can say to someone when they’re buying, ‘Here are the five things you need to do to get more clients.’ It’s going to make it easier to sell. They’re going to be more comfortable buying it from you because they know you’ve got all these results before, especially if you’ve got some statistics like, ‘If you make ten phone calls to this specific industry, you’re going to get one client at this average dollar sale,’ or whatever it might be. By having a solid marketing plan, it’s going to help you to then convince them that it’s going to be easier to run. Of course if you’re doing all of these things together, it’s going to maximize your sale price through the roof. Definitely worthwhile what you’re doing.
Tip #6: Renovate
Tip number six is no different to a property. I’m going to use the word ‘renovate.’ Tip number six is to renovate. When I say renovate, make sure your business looks attractive. If it’s an actual physical location like a shop or an office or a van, make sure it looks nice and clean and tidy. If it’s a van, make sure all the dings are out of it and it’s been resprayed or polished. If it’s an office, get cleaners to come in and do an overall clean. Get rid of the clutter in the corners. Get it organized. Get it smelling fresh.
People don’t want to buy something that looks worn out, worn down. I know that you may be tired, you may have had enough and that’s why you want to sell, but just put in that little bit of extra effort. It’s like when you sell a house, if it looks like rubbish, you’re going to get a rubbish price. If it looks excellent, you’re going to get an excellent price. Same thing applies in business. When I talk about renovate, it could even mean doing things like renovate your logo or renovate your website. Get things looking fresh, exciting, and make it look attractive so that more people are going to want to buy it from you.
About the Author
Ben Fewtrell is a sought-after Business Coach, Keynote Speaker and trainer who has featured in Virgin’s Inflight Magazine and Entertainment Portal, SKY Business and “Secrets of Top Business Builders Exposed”. He is also the host of the popular Business Brain Food Podcast where he interviews leading experts on anything and everything business.