How to Build a Business That You Can Sell
Whether you plan to exit your business in 10 months or in 10 years, you need a plan. Unfortunately, when I talk to business owners, their plan is typically to work really, really hard until they can’t work anymore, then to just pay the bills and shut the doors. But what if you could add value to that business today and that value continued to increase so that when you do go to exit the business, you have the highest potential return on your investment?
Our definition of a successful business is a commercial, profitable enterprise that can work without you. And yes, I said WITHOUT you. Think about it — when a buyer comes to buy your business and you tell them, “Here’s what you get for buying my business: You are going to work 80 to 90 hours a week, you just barely get to cover your bills, and sometimes you get to take home some salary.” How valuable is that business compared to a business that can run without you like a well-oiled machine?
Well, there are six key steps to make that happen:
Step #1: Mastery
It is essential to get the fundamentals in place so that you can be sure you are making a profit. The mastery phase includes 4 key areas:
- Destination mastery: You need to have clarity about where you are going and where you are driving the business. Your vision, mission, and culture statements are key to this.
- Money mastery: You need to know your numbers. This includes having a scorecard that you manage and having predictable cashflow. Work through your numbers so that you not only know your results, revenues, and profits but also understand your Key Performance Indicators that led to them.
- Time mastery: You need to gain control over your time management. The goal is to be working more ON your business versus IN your business. Your productivity (and the productivity of your people) will determine your success and profitability.
- Delivery mastery: Set very clear customer service delivery requirements and expectations. Consistency is more important than brilliance.
Step #2: Niche
Once you have a consistent base profit and have mastered the fundamentals of your business—where you’re able to deliver profitably, productively, and with enough information to make great decisions— you need to find your market uniqueness and begin focusing on making more revenue at your new higher margin. This phase is where you develop a clearly defined (and efficient) sales and marketing program to create a niche for your business, which results in predictable and stable cashflow.
Step #3: Leverage
In order for your business to run like a well-oiled machine (whether you’re there or not), you need to leverage the processes and the people in your business and you need to begin to put systems in place. Take the things that you are doing (the day-to-day tasks) and delegate them, outsource them, or hire someone else to do them. Make sure that you document your processes so that you can take what’s in your head and can easily train somebody else to do them.
Step #4: Team
This is the opportunity to put your dream team in place. Once you document all the things that are in your head and you write clear job descriptions, you can easily recruit the right people with the right skills and train them to take over the day-to-day of what you do.
Step #5: Synergy
Synergy is when the business is running like a well-oiled machine and the last piece is just replacing you as the head of operations over the day-to-day. This is when you hire a general manager or a COO who you can call from the beach to see how the business is doing.
Step #6: Results
This is when you are truly getting results as the business owner. You are living off the passive income of the business, you are checking in monthly or quarterly as a board member, and the business has the highest potential value that enables you to get the best return on your investment when you go to sell.
Remember: A business that can work without you can have 6x more value than a business that cannot! Start planning now so that you have a profitable exit strategy in place.