Value to the Next Owner (Topic 2 of 4)

Value to the Next Owner (Topic 2 of 4)

Having an idea

This is the 2nd topic in this short 4-part series, covering 4 problems I see people have when trying to prepare their business for exit.

You want to sell your business. You have years of sweat equity, money, and emotions tied to this amazing entity you have built. Your clients love your services and receive great value. Your employees and contractors love to work with you and rely on your business for all or part of their income. You know there is something worth selling, but what and how much value is there for another person to purchase.

First, if you are the sole product in your business (see Part 1 in this series) you may need a much longer time to make the transition to a salable business, if at all.

Let’s assume you have assets in your business worth selling. There are many, and doing a full valuation of your business will be needed before you can sell. But how do you prepare. Here are three types of assets that can greatly affect the value of your business.

Proprietary Systems

Your service includes a proprietary system, known by clients as something valuable; something they would buy again and would also refer to other people. Your services must be seen as unique to your company, so that another owner would be able to monetize them. A proprietary system can be made into many different products including: books, workbooks, training, online courses, digital downloads, ongoing support, maintenance, on-boarding, and, upgrading, etc.

To create a valuable, unique, and salable proprietary system you need your system to have unique value that sets you apart from the competitors. If you are the only reason someone buys your product, the uniqueness cannot be easily sold. Build the uniqueness around how the product is delivered, how it solves problems, the outcomes, and the steps your clients will use to get to their results. Picture your product being delivered by someone else or in a different way (e.g. in an online course). If you can see how this works, then a buyer can also see how they can make money off the business when they buy it.

Processes

You have processes to manage all the people and operations in your business. This means you must have written procedures. It does not mean every person must follow instructions ‘to the dime’, unless you are in manufacturing, but it does mean there needs to be an expected way to do things that is not only in writing, but is trained, evaluated, maintained, and updated regularly. A good process will support consistency in your business operations, adding value to the business. A good evaluations process, with feedback from those doing this work, will ensure you are always moving forward as things change.

This asset is valuable to a buyer, because when the buyer takes over they will know there is information that shows how to operate the business and continue delivering great service.

People

I want to reiterate, if you are the only person in your business, doing the operations and delivering the services you don’t really have value to sell. Again, see Part 1 in this series for a bigger perspective on this.

A great business has great team members. Your team gives input into the health and direction of the company, they follow the processes, they understand how the proprietary systems are valuable, they have pride in what they do to help create value in the business. When a buyer takes over the business, there is a time of adjustment and changes will happen. Having a team that already knows how to manage change will ensure the transition to the new owner will be more successful.

Adding Value

You may want to slow down to step back from your business, but if you want to ensure your business has value you must continue to build and grow the business. The key is, you are growing the business without adding more on your own plate. Creating value for a buyer is just like creating a healthy, growing business: You or the buyer must be able to envision the future of the business and see how it can continue to be profitable. A business with a future is a business with value.

The Series – 4 Topics

Watch for the rest of this series, coming in the next few weeks.
  1. Your Business Does Not Run Without You (Part 1 Article Here)
  2. Value to the Next Owner (Today’s Topic)
  3. No Team, No Vacation (Part 3 Article Here)
  4. The Succession Plan – What’s Involved? (Part 4 Article Here)

Check your EXIT Readiness – take this valuable assessment


This article is 100% original content – The articles you read in “Thoughts of Change” are 100% created by Barb Stuhlemmer, not by AI.

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