Can Your Business Really Be Sold?

Millions of Baby Boomers own their own business, where they have also stored the majority of their net worth.  Sometime over the next 10-15 years these businesses will need to change hands.  Many of these owners, if they consider their transition at all, will say they will sell the business when the time comes.  But can they?  Is their business really saleable?  What makes a business saleable anyway?

John Warrillow has written a very interesting book on this topic, Built to Sell.  The book is written in a very easy to read story format that mirrors many of the experiences he faced when he tried to sell his business.  I had the chance to meet with John at a conference in New Orleans, and unpack these concepts a little further.  The reality is that there are many factors that go into answering the question posed above and I will start by detailing a couple key points.  These are the same issues I see often, while working with my clients as a partner with B2BCFO®.

Many businesses are an extension of the owner. If the owner where to walk away from the business; there would be no business.  Often a large percentage of the business is linked to one or two key customers, who in turn are controlled by their relationship with the owner.  This is a high risk scenario for any business; being dependent upon too few customers.  From a sale of the business standpoint, this business is often worth considerably less than the owner would like, if he were able to sell it at all.  To move the business toward being saleable, you will need to make some changes.  These changes will often take years to initiate.  This is the reason- in my articles and when dealing with my clients- I emphasize the need for strategy around the real, long term goal of a business owner.

To move a business toward salability you may need to change what you sell and how you sell it.  If you set up a graph, similar to the one below, and put “Teachable” on the vertical axis and “Value to Customer” on the horizontal axis you have a method to gauge your current product mix and set a new direction

Next, plot the products or services you sell as points on the graph.  First by teachablility, how easy is it to train someone new to sell or produce the product or service you sell?  Second, how valuable is this product or service to the customer?  Do you sell a commodity that can be purchased anywhere, or do you sell something that is unique and therefore carries a premium price?  Clearly your goal is to have product that can be placed in the upper right hand corner of this graph.  Then you are on your way to having a business that has value.

I do not propose that this undertaking is easy, but if you want to create lasting value in a company and allow for an easier transition, then you need to begin moving down this road.  If you want help with this, as a partner with B2BCFO® I am well positioned to lead the process. You can contact me at pelworth@b2bcfo.com.

 

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