Five Pieces of Advice To Help You Prepare To Sell a Business
If you are one of the millions of Americans who run a small to mid-sized business, I’ll bet you have asked yourself – I wonder if I could sell this someday?
Around 1985, I asked myself that very question.
My wife and I had been building our wholesale bakery business, Rachel’s Brownies, in Philadelphia. We were growing fast, and I will admit that I was not always sure what I was doing.
When I started to look for advice on how to sell and package a business for sale, I got some valuable information from an advisor. We started thinking about selling several years before we began the process so that we could fix some issues that would make our business less valuable.
I’m glad we started early.
Here are five essential pieces of advice I received and followed.
Five Valuable Pieces of Advice
- Delegate so you can work yourself out of a job. A business is more valuable if it can run without you. In other words, make yourself redundant. This advice was helpful because some businesses get acquired and don’t want you to stay with the company. If your company runs without you, you have developed effective strategies and protocols to get things done. If you’re going to sell and move on, don’t make yourself critical to the ongoing business.
- Show a track record of progressive growth, success, and profitability. If you can show consistent growth year over year, even if it is small, the new owners can invest in accelerating it. Buyers want to know that you have figured out how to get customers, serve them and keep them. An erratic pattern like a rollercoaster isn’t appealing; smoothing out revenue and earnings is critical.
- Customer concentration can be a problem. If 45% of your revenue comes from one client or customer, that may scare off buyers. If that customer goes away, your business might implode. Think carefully about the ideal client profile and how much business you are willing to have in one basket. If your buyer leaves or that company is in trouble, you could be up a creek. We turned down some increased volume with United Airlines because they were becoming too big a customer. It sounds unbelievable – but we had to say no to them to protect ourselves. It turned out to be an intelligent choice. Spread out your customer base.
- Focus, focus, focus. No one needs you to have 32-line extensions. The acquiring company can continually expand into new areas or product lines. What we decided to do was instead of adding cookies, muffins, and quick bread to our offering, we took our brownies in different formats to different channels. We also made a few different flavors for different times of the day or occasions. (Can you say Breakfast Brownies?) We sold Rachel’s Brownies to convenience stores, supermarket freezer cases, airlines, restaurants, and Ben & Jerry’s to make Rachel’s Brownies Ice Cream in their scoop shops. We stayed focused on being the expert in brownies.
- Be different in a meaningful way. Our advisor suggested we market our brand in a way your competitor wouldn’t do. We gave every store a wicker basket and gingham checked napkin to help communicate the homemade look. It was a ridiculously difficult thing to scale – but it also offered us prime real estate at the cash register of most stores. What is your unfair advantage that only you do?
Selling a business requires planning and a thoughtful advisor. And if you are considering selling in a few years, there is no time like today to start working out your strategy. You have to plan with the end in mind.
I know several people who specialize in business valuation and can help you sell your company. Connect with me if you want a referral to get advice. Or, set up a call with me, and I can share more details.
The time to prepare your business for sale is often years before you need or want to sell.
You can set up a time to chat with me about your marketing challenges using my calendar. Email me jeffslater@themarketingsage.com Call me. 919 720 0995. The conversation is free, and we can explore if working together makes sense. Watch a short video about working with me.
Photo by Cytonn Photography on Unsplash
