What are you building your business for? What’s in it for you? You have a choice between two clear alternatives: Either you’re building it with the aim to eventually sell it for capital gain, or you are building it because you never want to do anything else. There are no other options. You need to think seriously about your choice and be very clear about the implications of each option.
You may be content with a small successful niche company that you don’t want to grow. You are probably already achieving what you want. There are many businesses like yours; partners who have been running a restaurant, a small factory or a dry cleaning shop for 20-30 years. This kind of success is admirable. There aren’t many tech companies that have been able to achieve 20 years—at least not ones where the owners are satisfied with their success. But if that describes your business, then this article is not meant for you.
However, if you’re building your business with the intention of one day selling it, then decisions you make now will determine the success level of that sale. The price you get will depend on the criteria of the buyer, not on how you view your business. You need to know what those elements are and start building them into your business NOW.
There are certain non-negotiables that a buyer must gain when buying your company before he or she considers the cream in your offer. These include:
● Competitive edge
● Business model
● Cash flow
● Customer base
● Legal structure
● Business team
● Financial backbone
There’s also risk management, contract documents, marketing and partner relationships with suppliers and government. Then, when you’re ready to sell, there’s a sales process, the putting together of an ideal team, finding a broker and the sale itself. But the list I’ve given you contains the critical elements in terms of preparing your business to be sold at an optimum price. Let’s have a look at one of them in more detail.
Does your business have the ability to grow? A buyer wants to see the potential that his or her investment is one that won’t remain stagnant. This is called scalability. There are three requirements for achieving scalability: repeatable processes, teachable staff, and the ability to gain market share by giving customer value.
“If you cannot measure, you cannot repeat. If you cannot repeat, you cannot scale.”
You need repeatable production processes than can quickly scale up to meet increasing demand; as well as repeatable marketing processes that support your goals. These processes need to be repeatable by ordinary people with average skill levels. If they’re not, you will lose your ability to scale; because everyone will have to be fantastic at what they do. (There just aren’t enough of those clever, talented people to go around)
But how do you know which processes to repeat? You have to measure what you do and test various options. Which options should you test? The ones that are most important to your business are those that affect growth and scale. This makes it an easy choice, doesn’t it?
That’s all we’ll cover for today. Next time I’ll show you some actionable ways to implement workable processes into your business.
CEO and Co-Founder
neXtep Business Builder Community Pte Ltd
Singapore ACRA Business Registration Number: 201424522Z
80 Kitchener Road #09-09/10 Singapore 208539