Ensure you can fetch the best price for yours

Here’s a hard truth:

If you can't sell your small business, the brutal reality is that you own a job.

You might think you have a thriving small business that would be a valuable investment for interested buyers. But if it’s not perceived as having reliable future operating cash flows and value, then you still only have a high-paying job.

When founders ask me how to plan for exit, I often raise this consideration to demonstrate to them that in the real world, many small businesses are bought and sold without a thorough understanding of indicators that predict equivalent (or better) future performance. Or, more simply, attributes of a highly valuable business. 

Prospective buyers will be investigative. 

They may employ tactics to try and determine how badly you need to sell or what's going on in your personal life that might influence the price you’re willing to accept. They typically also consider the state of the economy, which in most cases, will be completely outside of your control. These considerations, while often indirectly related to your actual business, often impact the price buyers are willing to pay - and not to your benefit.

So, what should your business have in order to fetch the best price? I’ve covered four key attributes that stand out for highly valuable businesses. 

#1: They’re in impeccable order

When I say order, I’m not talking about having neatly lined shelves (if you’re in retail), or a clear proposal template (if you’re in consulting), although, of course, these things are important.

Instead, I’m talking about processes. 

Highly valuable businesses have a clear direction, underpinned by a strong foundation. That foundation is process, documentation and predictable service. Read on to find out more about these attributes.  

#2: They have well-documented processes

In order to get the best price, you shouldn’t be selling the ownership of your business as a complex job with many moving parts to juggle, but rather as a well oiled machine. One that if the new owner chooses goes hands free for a while, can feel confident that things will continue to run smoothly. 

This means clear operational processes are key, and not just ones contained in your mind as the founder. Processes should be so clearly documented that they can easily be picked up and implemented by your prospective owner and a management team. This is foundational to keeping the wheels in motion. Further, it is not sufficient to just have clear documentation; it also needs to be organised in a suitable way that is easy to locate and refer to when it is needed.  

A Quick Helpful Hint on Processes:  If you are finding it difficult to write all the steps / processes down then maybe they are not simple enough.  At the end of the day the simpler the process the easier it is to train employees on.

Just remember: Good documentation may well be one of the most proportionately valuable assets your business can have. They provide a roadmap to recurring revenue.

#3: They don’t have to be run by experts

To build on the previous point, clear documentation should often negate the necessity for highly technical experts or managerial extraordinaires to have all hands on deck, at all times. 

Nor should your new owner be in this position - after all, they likely want to purchase the business to afford them more freedom of time, not less of it, by having to oversee the day to day running of their new investment. If anything, they want to focus on high level strategy, not ‘business as usual’ activities. 

Solid processes should ensure that the business can run smoothly, where each team member feels empowered to meet the requirements of their role without having their hand held. 

A business that can lean into the operational processes embedded into its culture is more valuable to any prospective purchaser than one that is reliant on people with relevant expertise. 

#4: They offer a uniform service to customers

Being predictable isn’t often glamorous if you’re a person - but for a valuable business, it’s essential. 

Having predictability creates positive psychological benefits for customers, who feel assured that they can expect a certain experience across each touchpoint of the business. On the other hand, unreliability hurts retention and a business’ ability to produce steady recurring revenue. 

Once again, this final attribute of a valuable business, builds on the foundation of strong business processes, where its team is capable of reproducing the same customer experience, at all times and at all scales. 

Takeaway

If you think your business is lacking in any of these key areas, it’s worthwhile conducting a process audit to see what can be refined and improved before enticing potential buyers. Good documentation is evidence of solid functionality for your business and could have a disproportionately positive impact on your business’ perceived value. 

Thinking about selling now? Let’s take this discussion a step further. I welcome you to book a free 45 minute call with me to discover how I can help you develop these business attributes to get the best sale price for yours.