Selling the business should be one of your long-term goals when you start your business.
The business should be your tool or the vehicle for you to make money, have fun and do something you like. Focus on building your business so you can sell it when you want to or need to. How do you sell a business? The question should be “who can pay you the most for that business?” It is easy to sell a business, the hard thing is to get top dollar for your business. The three people who will pay the most for a business are someone from within your business, your customer or a competitor. A business owner should be planning from day one to sell the business to one of these three people. There can be other situations that arise that will allow you to sell a business for top dollar however those are not always situations you will be able to control.
With these three ideals people you will have the ability to have more control of the sale and price of your business. You have a chance to groom these people and control the situations around them to make your business look like a better business to buy. So as you operate and grow your business be aware of how your decisions will affect these three people. Let’s take a closer look at these three.One good prospect for your business is getting someone from within your business to purchase your company. Ideally you should be grooming at least 3 people to take over your business and ultimately to buy it. This process should start 3-5 years in advance. You should hire people with the intention that they may turn into a good prospect to buy your company. You should be looking for key people in your organization that can be groomed to run your company. You should start talking about this subject to these people so you can learn if they are interested. It is important to know if they can think differently about work and your business when they know there may be an opportunity to purchase the company they work for. The hope is you will see a change in how they act, the type of decisions they make and how they treat other people in your company. You will find that some people will quickly rise to the challenge. The key will be to keep them interested for two years so they can learn the business and believe the business is worth what you want to sell it for.
In earlier book information it was discussed that you need to set up your business so it runs itself because you have set up a process and procedure for everything. You then put people into positions to run the different processes and groups of your company. This should allow for simple management of those groups and processes. If the process and procedures are good, managing it should be easier and as a result it should be easy to change people in those management positions. Move these three people around the company so they learn how the company operates and who the critical people in the company are. Encourage them to develop relationships with people so there can be a working atmosphere instead of one way direction of information or power. Let these people know that they are being groomed to run the company and hopefully buy the company. The people who are inspired by this will want to do better and carry a different attitude within the company. You will then see who is a good prospect to lead the company and who may rise up to buy your company. It will become evident who is going to work toward this goal of yours and make it their goal. You can create situations for your people to succeed as well as test them with tough tasks. You should encourage them to act as a team for a purchase. You can give them more company information so they will know how much the company is really worth. You can base their compensation on a purchase or provide incentives to work toward the purchasing the business. You have the opportunity to control more aspects of how the company is viewed by these people. You also have the chance to help these people thru the tougher parts of running a business so they can have the confidence to do it on their own the next time the situation arises. If you do a good job hiring people and picking people to discuss the company purchase, you can create a situation where more than one person will be interested in purchasing the company. You can increase the price of the company if you can have a management team purchase your company. A group of buyers will help to reduce the risk of buying the business. One person can be more cautious or worried about a large dollar amount. A note about creating a management buyout is not to create a competition in the training process. You want to put people in situations where they are working together. Your rewards and recognition should be based on team or company goals instead of one group versus another group or one person’s performance against another. You want to bring people together during the training process so when it comes time to sell the business they will again work together to accomplish this goal. You want to find people within your business that can be inspired to want to own your business. Then you want to train them by putting them into situations where the business is going to look good. You also want to create situations where they will succeed. This will help to build their desire to go on a path to buy the company. Another prospect for the company purchase is your competitor. You can create situations where you are a prospect that should be bought. You can target a competitor by going after their customers. You can start developing relationships that are better, more strategic or offer more value than your competitor. Find out what these customers want that your competitor is not doing or providing. Position your company to be a better supplier. This may be your normal course of operating your business however when you add in the objective that you want to position yourself to be purchased by your competitor it will add a new dimension to your decision-making and business strategy. You will also want to target your competitor’s products. You can price your products cheaper. You can add features or services to be more valuable. You can change aspects to differentiate your product. Again, this is a normal process is competing against other people in your industry however, when you develop an objective where you want to target another company’s products because you would like that company to purchase your company you will think differently on many decisions. You can create a situation where your competitor should or needs to purchase your company.
The goal is to become a company that the competitor will want to get rid of. The way they can do that is to purchase your company. When you have reached this point and created awareness by your competitor, you can start to market your company for sale. Make your company a strategic acquisition for the competitor or the industry. The last prospect that you will have some control over is a customer that should purchase your company. You need to build your company to be a valuable asset so that the customer can not lose you as a supplier. Find ways to do everything your customer needs. Add responsibilities, add features, include services and do as much as you can to help your customer. In doing this you can develop yourself into a company that your customer needs to have as a supplier, invaluable. Make decisions that will make yourself more valuable to your customer. When you have created the value the customer needs then it is a good time to start marketing your company to your customer. If all this seems different or difficult to execute in your daily business operation then think about it like this. Imagine that your brother or sister became sick and could not run their company. You are giving the responsibility and task to take over your brothers/sisters business and sell it in the next 6 months to pay for their medical bills. The first day you would have to go into that business with the objective to sell the business. If that is your purpose, your decisions on everything from your employees, to customers, to vendors will be different. You will be interested in positioning the company to be purchased. You will also find that the three easiest people to sell it to will be the three that are mentioned above. Start today by thinking differently about the purpose of your business. This is a vehicle to help you and one of your goals should be to eventually sell it. The way to control the sale and generate the most amount of money from that sale is to position is properly with the best three buyers, your people, your competitor or your customer.