Last month we discussed the three types of buyers for your business: industry buyers, strategic buyers, and individual buyers. This month we’re going to focus on what you can do to position your business to attract the most individual buyers, the largest pool of buyers who are willing to pay you the highest dollar amount for your business.
If you want to increase the likelihood of selling your business at the highest price, your (the owner’s) job responsibilities MUST be easily transferrable. That means that the business must be able to stand alone without the owner: you must work on your business, not in it. Revenue must continue to flow after the owner exits the business.
Of course, that’s not to say the new owner will not work hard and serve as an integral part of the business. Rather, the owner’s main role should be general management, overseeing long-term strategies and growth objectives, rather than being immersed in the day-to-day technical details of running the business. Those duties are best left to employees who likely will stay around after the new ownership takes over.
We generally recommend that businesses follow the Rule of Two: each job in your organization should be able to be performed by at least two people. Make sure everyone is cross-trained so they can easily and seamlessly move into another position, if necessary.
In a retail business where the owner is heavily involved in purchasing, the owner should bring a salesperson on buying trips. The owner should also keep detailed records of such trips, including who the owner spoke to and bought merchandise from, and also keep records of what merchandise sells. This turns the owner’s eye for merchandise into a system that can be transferred.
The owner of a service business can keep a track record of jobs completed, including the estimate for each job and the actual costs for each job and technician. This way, a new owner can go back if a similar job comes around and give an estimate very quickly and accurately. More importantly, anyone in the company could give the same estimate simply by checking the records. If employees turn over, a really prepared owner could tell us in a moment what an estimate would look like for an experienced technician versus a new technician performing the job.
In a business where the owner is the main or only salesperson, the owner could utilize a customer relationship management (CRM) software program. These programs typically cost hundreds of dollars but could help you sell your business for hundreds of thousands of dollars. Using a CRM program, an owner can track every contact’s complete history: every quote, every job order, and every conversation. This way, an owner can demonstrate to a prospective buyer that the salesperson is not the only revenue driver, but also that other employees (e.g., customer service reps) have contact with clients and what follow-up transpired or is scheduled.
Not only do these guidelines help you position your company to sell when the time is right; they also increase profitability and make your day-to-day job easier. Even if you have no plan to sell, either soon or in the distant future, these are strategies that you can put in place, at little or no cost, that will dramatically improve your bottom line.
If you need help putting together a strategic plan, please contact the Benjamin Ross Group to speak with a business broker who can help you start the process.