People frequently ask me what is needed to make my business “Sale Ready.” I want to spend a few minutes and give you my perspective on what is most important when selling. Because I was in the cleaning business, or more accurately the window and pressure cleaning business, I can only speak from that experience. However, most of what we will discuss here is applicable across many different types of businesses.
First, it is extremely critical to look at your business from the perspective of a buyer. Most people are emotionally attached to their business because of the years of hard work and sweat poured into it. I get that, but a smart buyer doesn’t care, nor should he.
People (including me) have a tendency to give themselves the benefit of the doubt in most areas of their business, but a potential buyer will not. To start, let’s “Switch Perspectives” to that of a buyer.
Let’s look at what a smart buyer needs to see when looking at a deal:
The important part to remember here is that the DOCUMENTED and PROVABLE earnings your business has ALREADY accomplished is what will set the bulk of your businesses value (sales price). People thinking of selling often incorrectly assume the buyer cares about all the “deals in the pipeline” and the “huge growth potential” and they might care a little,but a smart buyer will always primarily buy on past performance, not future potential. Everyone thinks their business will double next year and everyone wants to sell based on that assumption. It’s pure madness, it doesn’t make sense.
Business stability can come from several factors. Having thousands of customers helps diversify your risk rather than having a few huge clients. Also, having a multi-year track record of documented solid and stable growth goes a long way in showing stability. Having great key employees in place for several years is also critical to get the highest possible value (price). The more stable the company, the less the risk and the higher the value.
PAST GROWTH METHODS
Being able to show in a methodical and documented way EXACTLY how your business got to where it is today is very important. Do you have a specific sales method? If not, build one. Do you have a month over month and year over year marketing calendar and growth charts? Make them. Having these resources to show to a serious buyer will help you tremendously in proving a clear path to future growth for the new owners. They don’t want to reinvent the wheel with your company, so make sure you actually build a wheel! They need to know your business will continue to grow even when you’re long gone.
Future upside can be a great caveat but only if it can be documented. Saying things like “There are thousands of homeowners around here….If we get them all we would triple in size!” does not impress a savvy buyer. Show your future upside by mapping out counties/cities/neighborhoods and areas where you are just starting to get traction but have only “scratched the surface”. Follow that up with an exact marketing plan and proven results, then run the numbers on it. Show them a list of your local competition, local demographic information, and why you’re better. The best types of future opportunities come from existing relationships that grow or have very realistic chances of producing huge upside in the future. Tell them about those key relationships and why they will continue to bloom into a beautiful profit center. Again, all of this needs to be verifiable as they don’t give you the benefit of the doubt. I know you’re super cool and all, but this is business!
Systems are huge. A business with no systems will implode when the owner walks away. It is imperative (if you want to sell for a high price) that you have well established systems throughout your company. The goal should be simplicity and it should not require you personally for it to work (i.e. key employees). If you went to Costa Rica for a month and came back to your business it should have generated PROFIT the entire time you were gone with little or no problems.
If you have the following five points in place at least at a basic level,congratulations! You are now in the top 5 percent of your peers! The good news is, you do not need to be a genius to accomplish this, just work hard, play the long game, have leadership, and systems.
Take care and may God bless the work of your hands.
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