It may not sound sexy, but transferrable value will excite most potential buyers of your business. Part two of a three-part series. To read Part one, click here.
Part 2: Preparing to Sell Your Business
Believe it or not, the buyer of your business isn't interested in you. In fact, the less of "you" that comes with the business, the more money they will likely pay. No offense!
A buyer wants a business that will run without you. They want to buy an asset that is easily transferable to their control, without experiencing a loss of revenue or any unexpected headaches. To give a buyer what they want, to make your business truly transferrable, consider these elements that typically comprise value in an enterprise.
Hard assets, like equipment
The most recognizable parts of your business may be its gear, buildings, vehicles and technology. Manufacturing and retail businesses typically sport expensive and obvious hard assets, while service-based businesses likely own technology-based ones.
These hard assets are part of the process your business engages to produce an output, either a product or service. They may hold value to a buyer who wants to avoid replacing them in the near future. Or, if they are custom-designed assets, a buyer may value them more. Reassure your buyer that your business has established proper maintenance and support teams to give these assets long life.
Soft assets, such as intellectual property
Your business likely owns more assets than you realize. Take an objective look at your business to identify valuable components and they will most likely include things like your customer database, your reputation (also known as brand), the expertise of your team and any intellectual property (content, documents, patents and propriety processes).
These assets can be more valuable than any physical assets you may own. In fact, a service-based business (which is 75 percent of all Canadian businesses) may own very few hard assets at all.
Your objective with soft assets should be to make them – you guessed it – transferrable. For example, it's a good practice to install a management layer to run your business and coordinate the activities of your employees because that will make it easier for a buyer to take over.
Systems that bind them together
Now, here's the real trick: helping a buyer – any buyer – to step in and run things. Think turnkey operation. The ability to assume control of a well-run business lessens concerns that the business will stall or fall apart without the ongoing involvement of the founder. The less you, the better.
In simplest form, systems are processes and procedures to produce desired business results. Systems tell us how to effectively harness human, machine and materials to produce an output. It's the operations manual that details every function, every job responsibility and every step of every activity.
Systems are built over time, and should be continuously improved. In fact, every business is constantly improving its systems. Your goal in terms of the buyer is to supply them with a company that runs as best you can make it using systems anyone can manage.
Buyers buy for different reasons: there are strategic buyers, who want to acquire your company as part of a bigger plan; and there are financial buyers who are attracted to the returns your business generates. Both types of buyers want to avoid as many headaches as possible during the acquisition or merger process and will pay more for a business that promises an easy takeover experience.
Roger Pierce is one of Canada's top small business experts. He takes what he's learned from starting and running 12 small businesses and shares it with thousands of entrepreneurs worldwide in articles, blogs, videos and presentations. He's also co-author of the book, Thriving Solo: How to Grow a Successful Business.