How to build a business you can sell

How to build a business you can sell

Business For Sale

Many entrepreneurs start their business with the goal of earning an income for themselves, but they often think of the business only in terms of them running it.

In truth, there is a huge benefit to starting a business either with the goal of selling it or at least setting it up so it can be sold at some point in the future. You don’t have to plan on making a fortune off the sale, but the efforts that go into creating a sellable company will also increase the chances your company thrives while you’re in charge.

Here are some things you can do to increase the chances your business can successfully be sold.

Put effort into it

Whether you plan on staying in your business for a long time or are looking to sell as soon as possible, you need to run your company as though you’ll be around for a long time. A sellable business is one that is thriving, which takes time and energy. Don’t start up a business to sell if you think you can give it a fraction of your attention before you walk away. That could lead to a scenario in which no one wants to buy your company.

Invest effort in your company and you’re more likely to be rewarded with a business that people want to buy, and pay top dollar for.

Structure your company correctly from the get-go

We are lucky in New Zealand that it’s relatively easy to set up a new company.  However, ensuring the structure of your company is correct from the start will not only keep the financial arrangements simple it will also make auditing of the company, should you decide to sell, significantly easier.

Find out more about the different options for structuring your company in New Zealand.

Keep your arrangements simple

Complicated financial arrangements make selling a business more difficult. If there are too many investors who have different ideas about how the business should be managed, or when it can be sold, you may find yourself unable to sell, even if you truly want to.

If you are involved in partnerships, make sure you are all on the same page about the circumstances that will lead to a sale. Ensure that your financial ties and arrangements are transparent, so buyers aren’t surprised when they complete their due diligence.

Keep the financials tidy

When it’s your own business it’s easy to start mixing your business expenses, and even income, with your personal expenses. Make sure you have a separate business account and credit card and keep all the transactions separate from your personal finances.

When you complete your annual Tax Return ensure you know what you can and can’t claim for. Having separate bank accounts will also help with your Tax Return.

Consider carefully financial support options

As a business owner there are several times when you might need access to financing. It may be in the early stages of your business for start-up office expenses, or later on for business assets and expansion.   There are many options for entrepreneurs to consider and the best option may be different if you are planning on selling your business in the future. Understanding your options and the impact these will have on any future sale will be key.

Find out more about the three finance options available for small businesses.

Develop standard operating procedures

You may like to take care of everything yourself, but that’s not practical if you want a business that thrives—and one that can be sold. To sell your business, you need procedures that can be done by anyone, regardless of whether you’re in the picture or not.

Developing and writing out standard operating procedures helps your current team run the business in your absence and makes your business more attractive to potential buyers.

Consider the conditions that would make you want to sell

Even if you don’t intend to sell your business, life can get in the way. A variety of circumstances can make it so you need or want to sell your company. Rather than making an emotional decision in the heat of the moment—which could result in you getting far less than you should—think about the circumstances and conditions that could lead to you selling your business.

What life circumstances would cause you to sell? Divorce? Illness? Retirement? What about the financial circumstances? Is there a minimum amount you want to get out of your business if you do sell? Would you sell right away if someone walked through the door and offered you X amount of dollars? Would you sell if the business were no longer making you happy? If so, what does that look like for you? What are the indicators you’re no longer satisfied with owning your company?

Keeping these circumstances in mind makes it less likely you’ll make an emotional decision and more likely you’ll make a rational one.

Final thoughts

Regardless of whether or not you plan to sell your business, running your company as though you will one day helps create a successful, thriving organization that is much easier to find buyers for.

That’s important because you never know what the future will bring.

Contact us to find out how we can help you build and sell a valuable business.

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