Getting ready to sell your business? Adopt a buyer’s perspective before you do anything else

by Mark Wardell

It has often been said that every business should be built so it can be sold, but what does that really mean? What makes one business more sellable than another? With over two thirds of Canada's private companies in the hands of the "soon to be retiring" Baby Boomers, it's a question that's being asked more and more.

To answer it, a seller needs to look at their business from the buyer's perspective. And from a buyer's perspective, it's all about risk and reward.

Following are 5 key goals for mitigating that risk while increasing the potential reward, and preparing a business for sale.

1. Transfer key customer and supplier relationships to the business itself and away from the owner. When key relationships are tied to the owner, a buyer worries that those relationships could be at risk once the business is sold and the current owner leaves. So the more you can do to off-load those relationships before the sale, the better.

2. Transition key operational activities to the business through the proper use of delegation, systemization, and training. If critical knowledge or skills reside with the current owner, a buyer may worry that the business will struggle when that owner leaves. However, if those processes are documented into an operating manual that employees follow as part of their daily routine, the company can operate and grow without the owner's daily involvement.

3. Create a viable and marketable strategic plan for the future growth of the company. A buyer's chief concerned is with the future success of the company they are looking to buy. If a seller can show that the business is on track for future growth and profitability, a buyer will find the opportunity more attractive.

4. Improve operational efficiencies and lay the foundation for increased profitability. An efficient company is not only more profitable, it demonstrates an uncommon attention to detail on behalf of the current owner. This reinforces for a buyer the idea that they are buying something solid.

5. Support a buyer's ability to obtain acquisition financing by demonstrating that the business is a solid investment, with or without its current owner. Financing is where most deals fall apart. So the easier it is for a buyer to finance the purchase of a business, the more likely it is that the deal will go through. Plus, a business that is easier to buy allows more potential purchasers to come to the table, creating more competitive bids and an upward pressure on the selling price.

What all of this boils down to is that the more successfully a business can run without its owner, the less risky it will appear to a buyer and the easier it will be to sell. And there's a bonus built into all this as well, because a self-sustaining business will typically sell for more money than one that relies on its owner.

So if selling your business is on your mind at all, I'd encourage you to take a few steps down this path first. When the time finally comes to sell, you'll be glad you did.

Mark Wardell is President of Wardell Professional Development (www.wardell.biz) an advisory group specializing in growth management for owner-managed companies.

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