One of the top reasons a small successful business is not salable may be because of you, the founder. When the operations of your business depends on the owner to do the work, there is really no business to sell; unless you plan on selling yourself with the business?
When you started your business, years ago, you did the work, because you had to. But over the years, challenges such as costs, training people, keeping good people, managing old software, etc., has made it difficult for you to take on more.
Let me share a story about a successful business, with under 10 employees, that had been in business for decades. The owner, we’ll call her Jessica (not her real name), wanted to start figuring out how to extract herself and her husband from the business. Their business is well known locally and they have a good seasonal retail business and a year-round service-based business, both under the same brand. Their goals were to sell one part of the business and keep the other, for now, reducing their own workload.
One of the challenges, they thought they had, were that their employees only did what was expected of them, nothing more. There was so much the owners had to do themselves because their people could not. They knew the business was too complicated for one person to buy it and step in to their shoes.
Another challenge was that they had excessive overlap between the two businesses, that they couldn’t remove employees to work specifically in one business, leaving them to look after everything in the first.
Identifying and untangling the resources (including employees, time, money, and some inventory) of the two businesses, was a key to getting started. Being able to determine what and who could be part of which business helped Jessica see the businesses as separate. It also helps determine an accurate value of the business they want to sell. But this is just moving numbers around, it is not changing how the business operates, nor the culture within it.
Untangling the resources and making the change to two business operations required:
- Evaluating which resources there were available in each business and which were shared.
- Making a decision on how to structure the businesses and what the operations would look like.
- Decide on a direction and define the objectives.
- Create a plan to follow to reach their objectives.
- And finally, this often missed step, was to evaluate what value each of the employees bring, what else they are willing to do, and how they would like to help during the transition and in the future.
Before Jessica started the evaluation, she brought her idea to her staff, let them know what she was working towards, and told them she was interested in their feedback. She was not sure this was a good idea. Maybe they would think they were going to be fired. Maybe they would think their jobs would change and they would have no say in it. Maybe they would expect to have to do more for the same amount of money.
The owner was so surprised to see her people interested, sharing ideas, seeing problems from the past that could be better managed, and a willingness to take on more.
Moving into the transition:
Responsibilities had to be adjusted, but everyone worked to find their ideal roles and what resources they were missing. Training was an important as was regular open communications. It became obvious that there were some roles in the business that only Jessica could do, so she worked on bringing in a new employee that could take on most of her work. She actually chose a person that was eager to own the business in the future. This became a softer transition for everyone involved. All the employees were able to learn the business from the inside, alongside the new manager.
Although Jessica has not sold the business yet, she now has two separate business corporations that have separate systems, separate people, and separate valuations, one of which runs without her. They have great staff that know the ins-and-outs of the business, eager to see it continue, and a new manager that has worked in the business, in training to be the future owner.
You may not have two business, but there are some foundational steps, discussed in this story, that Jessica and her team took to create a salable business. Here are a few things to think about when you are ready to exit your business.
- When the business relies heavily on the owner’s expertise, relationships, knowledge, and involvement, a business is less attractive to buyers because it is not something they can easily take over. Start removing yourself from all the decision making and get your people on-board early.
- When you have a business that is tied to your personal brand or image, an owner must be willing to stay on and assist with the transition. Over time, your best clients will see the new owner as the same value as you.
- If the business is a sole-proprietorship, then the business, at least in the eyes of the Canadian Revenue Agency is concerned, IS the person. They are not separate entities. You cannot sell yourself, so find a way to restructure your business. Alternatively, you can sell the assets of the business (including IP, online products, automation, relationships, and client lists, to name a few), but this leaves your employees without a job and your brand image disconnected from the services or products you sold.
Work on extracting yourself from the day-to-day operations and decision-making years before you are ready to exit. Share the brand image online with others in your business, so it is not just your face they see. Ensure you have a business structure you can sell. With these in place early you’ll have the process of transitioning into your exit plan long before you actually need to or want to leave.