We are told often enough as small-business owners, that we must have a plan in place to enable us to exit our business in a structured and orderly fashion.
It is, in fact, generally a good idea to have an exit strategy formulated and in place from start up on day one.
However, to be able to successfully implement an exit strategy, you must own a business that is a "saleable" asset.
So what does a business in the form of a saleable asset actually look like? Here are 5 key areas for you to look at if a prospective purchaser is to be sufficiently interested in making you an attractive offer to buy your business: 1.
Is the business profitable? This might seem an obvious question.
However, just because your business is showing a positive cash flow, doesn't mean it's making money.
Does it earn an acceptable return on your investment in time, resources and effort, over and above what you take out to live on? If not, don't expect to be able to sell it.
Simple as that.
2.
Would your business still be profitable if you weren't there to run it? If the answer is no...
you don't own a business, you have a busy job with overheads.
Unless you can clearly demonstrate your business will continue to make money when you are not turning up every day to run it, you're asking a buyer to buy your job.
How successful do you think that will be? It's vital your business generates profitable revenue without having to rely on just your efforts and expertise alone.
3.
Are you able to hand your buyer a set of operational procedures to follow and achieve the same results as you, albeit with some training? This is the basis of a franchise business model.
And this is why franchises are in the main very successful businesses.
Following a proven operating system dramatically increases the chances the business will continue to perform profitably for your buyer well into the future.
4.
Where are your customers going to come from? You might have a good number of customers today, but what guarantee is there they will remain as customers when you go? And, even if they do stay initially, they won't necessarily remain customers forever.
How will they be replaced? How can the new owner grow the business? If you're struggling for answers, this will have a significant impact on the price you get for the business.
If you can show a marketing plan that the new owner can follow - showing examples of past campaigns and their results and the customer service strategies you use to keep people coming back - the buyer is likely to pay a premium for your business.
5.
How is the business controlled? Could you appoint a manager and be sure the business will continue to be a success in your absence? If you can do this, your business can be replicated, and this will increase its value many fold.
This can be easily achieved through a systematic reporting system that keeps you informed and updated on what is happening daily in all key areas of your business.
Businesses with these 5 key elements in place will sell quickly and often for up to as much as 4 times the 'recast' net profit.
However, those that don't are lucky to get back stock and physical asset value (often highly depreciated) with no value attached to the actual business element whatsoever.
With all 5 elements in place, you will own a valuable and 'saleable' asset that will amply reward you for the years you've invested in time, money and effort.