Start With the End in Mind – and Build a Company You Can Sell

If you’re building a company, the decisions you make as you grow can directly impact value in a future sale. Planning for an exit or sale can help drive a premium valuation, and also help you build a stronger, more resilient business. This is important with the recent experience of COVID, and will remain important in a post-COVID environment.

As a first step in figuring out how to build a business that will sell, take a few minutes to think about your business from the perspective of a buyer. What would you look for if you were buying a business in your industry?  

Perhaps you’d want growing revenues or steady cash flow, a recognizable brand, long-term customers, a positive culture, customer service, trained employees, intellectual property, barriers to entry to prevent competitors taking market share …. and probably many more attributes. Once you’ve developed a list, review it. Most items on your list likely fall into one of two categories: they imply sustainable future growth or they limit future business risk.  

Buyers generally want to acquire companies that will enjoy sustainable growth, with limited risk factors to jeopardize income.

No matter when you sell, entrepreneurs who build their companies with these two criteria in mind will be more successful in the sales process. We’ve listed some ways you can incorporate these concepts into your business. Not every suggestion will work for your business, but applying or adapting some of these ideas as you grow can help increase the attractiveness of your company:

Drive Sustainable Growth. Buyers love growing companies with strong margins. Cracking the secret to drive profitable growth will unlock increases in valuation.

Reduce risk in all aspects of your business. Risk has always been an important factor in how buyers look at and value businesses. But after COVID, buyers are even more focused on ensuring that a business is able to withstand downturns or other unforeseen events. To ensure a successful sale, show a buyer that you have taken all the necessary steps to reduce risk from your business, wherever possible.  

The importance of each of the points above will vary by company and by industry. Contact Us to schedule a complimentary consultation to discuss how to build your business with a future sale in mind. We are happy to provide you with guidance or specific suggestions, an overview of valuation, and information on recent transactions in your industry.

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