As you get a little older, one of the natural things you start to think about is “What am I going to do with this business?” While you might find a buyer (as many do), or you plan to involve your family in some way. Anyone else might have to search for a while. While you’re considering that (family or not) and dealing with the day to day, it’s worthwhile to spend some time preparing your business for sale.
One of the ways to do that is to start thinking about what happens the day after closing. In many cases, your buyer is likely to request some sort of financing, which often comes as a revenue split payable to you. If you have to (or want to) do this, you’ll be a lot more interested in the buyer’s success.
Leaving a road map
Leaving the new owner a road map can’t hurt, no matter how experienced they are.
What roles will have to be filled to take over your business?
- Daily operations
- Product management and development
- Infrastructure management
You may have others, depending on your business.
What do these things involve?
In brief, run the business day to day, relieving the owner of all tasks. Making sure everyone on the team is communicating and is being communicated with. No mysteries, no surprises. If you had to be replaced tomorrow, what would it REALLY take?
Product management and development
Managing employees, consultants, their projects and the quality of those projects. Planning and executing testing so that quality meets or exceeds both your own and your customers’ expectations. Working out ongoing product plans, deployments and deadlines so these projects can be coordinated with other parts of the business.
Monitoring AR / renewal rate / renewal speed, keeping the bills paid, updating metrics, etc. Making sure your financial records resemble something a buyer and their people (banker, investors, etc) expect to see.
What infrastructure do you currently have to manage and care for?
Planning, design, development, and execution of marketing efforts per your marketing calendar. What prospects are you not reaching? Are there prospects who need what you do, but simply aren’t exposed to your company because of (what, exactly)? When you have churn, what is the cause? When someone declines to purchase, what are the reasons? The answers to these questions change over time, so they must be asked on a recurring basis. This includes lost customer re-acquisition.
Improve, manage and document the sales process. If there isn’t one now, develop one. It’s “easy” to take a company to two times current revenue by doing more of what you’re doing now, the same way you’re doing it now – throw “bodies” at it. However, it’s all but impossible to 10X a company that way.
Investigate expansion into adjacent markets
Are there closely adjacent spaces you aren’t yet addressing? Do the people that work with the people who work with your products and services all day need your help in a way that relates to your existing business?
Identification of partner and cross-marketing opportunities
Investigate partnering and cross-marketing opportunities where you can leverage your reach to help your partner and where your partner can do the same for you.
Standardize and organize company finances
Investors, angels and prospective buyers expect (hope) to find well-organized finances in forms they’re used to seeing. I don’t mean to say that your finances aren’t organized now (are they?), but they may need to be more formalized. What you want is something that wouldn’t raise concerns when an investor and their professional finance team sees them. Being able to provide such numbers to them on relatively short notice sends a message.
Other benefits of preparing your business for sale
Everything here is about ultimately about preparing for exit. That doesn’t mean that you aren’t focused on customers, in fact, it means just the opposite.
Everything you do to prepare a company for sale prepares it to withstand market challenges, slow months or quarters, while also making it more attractive for purchase. In particular, the road map makes it easier for you to “replace yourself” in the event you decide not to sell and instead, decide to become a passive owner.
No matter what direction you go, making the business stronger benefits you and the new owner.