If you are like many other business owners, you didn’t start out considering how to make your business sellable. You were too focused on making the company a success to worry about selling it in the future.
However, somewhere down the line, you may want to sell your going concern. It could be time for retirement, or you may want to build something new. Whatever the reason for selling your business, it’s likely that you need to make strategic changes to turn your company into something sellable.
Is your business sellable?
Most company owners see their profitable business and think anyone would be lucky to buy it. That’s probably true – you have something unique and special that you built. However, most investors or entrepreneurs won’t buy a business without these factors:
1. Accessible processes that people can follow.
2. Established systems for operations.
3. A way to transfer the business from functions to proprietary processes.
4. A way to transfer specialized business knowledge.
If you run everything in your company based on your own knowledge and expertise but don’t have a way to transfer that knowledge to the new owner easily, your business likely cannot be sold. Fortunately, there are strategies you can use to make your business sellable.
Here are five strategies to make your business sellable
In a recent interview, Business Success Consulting Group CEO Adi Klevit spoke with Cameron Bell, a Partner at Fairmont Capital Partners, about what characteristics would make a business interesting to his firm. They had an in-depth discussion on this topic, and Cameron shared five strategies any business owner can use to overcome deficiencies in sellability.
These five strategies are:
1. Extract business knowledge.
Many business owners hold all of the knowledge related to the company. This makes any transition between one owner and another completely impractical. The specialized business knowledge needs to be systematically extracted and documented so that others can utilize this information once the owner/seller has transitioned out of the business.
2. Document the processes and procedures of each department.
Businesses don’t run on CEOs alone. Each department has specialized and even proprietary processes and procedures. Often, these are kept in place by the owner/founder, who remembers what everyone does and where everything goes – even if a key employee leaves abruptly. A buyer cannot count on this foreknowledge. Instead, they need documented processes and procedures so they can become familiar with each department and efficiently train new employees on standard company practices.
3. Document the business culture.
Business culture is unique to each company, and every business has specific policies to protect the culture. These may be unspoken – or the culture may constantly be shifting. Add stability to the company and the sale by documenting the business culture and sharing what actions best support that culture. The new owner will want to ensure the culture can survive after the previous owner/seller is not there anymore.
4. Bring in a consultant.
If a business owner has yet to document processes and procedures or create a knowledge transfer system, they should bring in a specialist to extract, document, systematize, and implement processes. A business owner focused on selling their company should consult with specialists to get the documentation work completed.
5. Add a co-partnership clause to the contract.
Agree to co-partner or co-own the company for a period after purchase. This way, the buyer can have hands-on experience running the business and utilize the documentation methods that work for them to understand and document owner/operator processes.
Are you ready to make your company sellable? Get in touch with the team at Business Success Consulting Group! We specialize in process documentation and knowledge transfer.