When Do I Need to Start Thinking About Selling My Business?

We’re continuing with our brand new blog series, Ask Smart Financial, where we put your questions to Smart Financial CEO Steve Martin and COO Dr Mark Todman.

This week, it’s the turn of Mark, discussing the sellability of your business.

Remember Mark or Steve could be answering your question next month. Simply tweet us using the hashtag #AskSmartFinancial or email us and we could be answering your question in a future post.

Q) When do I need to start thinking about selling my business?

A) “Sellability is such a big part of the work I do with clients, and yet it often gets overlooked until the point you are ready to sell, so I commend the question!

“The short answer is the earlier, the better. The long answer is the earlier, the better – and there are a number of reasons why.

“Although it might sound premature, I believe you should build sellability into the very heart of your business, as you are starting out. It should form an intrinsic part of your overall business plan, ensuring you are building value into your business at its core, with a clear goal of where you are heading.

“The real benefit of building sellability into your business is that it opens up a number of options, not merely regarding your business but your personal aspirations. After all, a valuable business can provide the financial freedom and security you need to live the life you want. Give yourself and your ambitions the best chance possible by creating something of real value that will attract the right buyer, and more importantly, the right price.

“So we’ve established that sellability needs to be addressed at the earliest stages but how can you add value, whatever stage you are at? Well, there are a number of things you can start doing today.

“I’ve seen businesses make the mistake of relying too heavily on one client or supplier so make sure you have an even spread of revenue. Relying solely on one third party could make your business seem like too much of a risky purchase.

“Build a strong management structure – you’d be surprised how many business owners are the most irreplaceable cog in the machine. When they leave for any reason, the machine grinds to a halt. This kind of setup is incredibly off putting to an acquirer, making your business look too unstable to function without you.

“On that note, exit planning plays a big part in sellability. A buyer wants to know they are getting a secure business in a smooth transition. Putting together a sound exit strategy will reassure potential buyers that you’ve done the important thinking ahead of your departure.

“Remember, finding the right buyer can potentially take years, and the last thing I’d want for any of my clients is to be under pressure to accept an offer, so plan ahead, build sellability in as you go along and when you are ready to exit, you’ll have something valuable to attract buyers with – and something you can be proud of.”

“Conversely you could be made an offer for your business at anytime. You’re more likely to get an offer if your business looks like an attractive acquisition. I wouldn’t want any of clients to be made an offer for their business that falls apart once the potential acquirer enters due diligence because the business hasn’t been built to sell.”