Your Five Year Plan to Build a Business to Sell

Business.com / Business Solutions / Last Modified: April 21, 2017

If you want to sell your business, you can't expect overnight miracles. Invest your time and master your patience to build the most attractive business.

Many business owners dream of building a strong, profitable business, attracting the interest of some investor and then cashing things out by selling the business. However, those same owners assume that it is just some fanciful dream and that no one would actually be interested.

That sort of negative thinking never helps, and an aspiring owner should think about how he can attract a buyer from the start. This is especially so because preparing your business to be sold is not something that can be done overnight. Smallbiztrends notes that owners should “spend three to five years preparing to sell in order to get the best price possible.” If it takes that long, here are some things that any businessowner has to consider before selling his or her business.

Plan to match the market

If you want to build a business that attracts as many potential buyers as possible, then a good way to start is to have a business in a field that buyers will be interested in. Think of the dot-com boom. People like Mark Cuban were able to gain massive amounts of money by building an online business that investors were willing to pay exorbitant amounts for.

But for the rest of us, this is much harder than it may sound. Remember that you want to sell your business in three to five years. This means that you do not want to get into a field which is hot now, but one that will be hot in the future. Making a prediction like that is tricky, but try to build a business that will thrive in an attractive field.

Profitability

A lot of businesses, both big and small, try to sell themselves by claiming that they are growing in some field that shows how successful they are. But having a rapidly growing number of clicks on an eBook or customers is always going to be less appealing to investors than being profitable.

There are two elements to profitability. The first is that you are making money. The second is that your profits – or at minimum, your revenue – is increasing year by year. If your company is currently not profitable, then you need to show buyers a clear plan for how it will become so.

You may observe that every business wants to become profitable, and that 's the point. The steps needed to attract investors and to build a successful business are often the same. A growing, thriving business in a valued market is likely to attract a buyer.

Keeping things clean

Building a business in the right field can attract buyers, but there is the matter of getting any one buyer to bite. Buyers will have huge amounts of companies to choose from and will look for any reason to move on to another company or slash the amount they would give you.

Be as open and transparent as possible, and don’t give undecided buyers a chance to second guess their offer. Keep a record of all business transactions over the past three years at minimum. Have an ownership structure that makes it clear who is in charge of what, and remove problem employees and managers.

Robert Sher with Forbes talks about building a “hair-free” business. A hair-free business gets rid of anything that would make a potential buyer nervous. Pretend that you are a buyer and think about what problems you might have if you were trying to buy your company. Work on fixing these problems well before any investor shows up on your doorstep, and you will have the time to make your company hair-free.

Building an independent corporate structure

If you intend to sell a business, such as an ebook business, then you likely intend not to be part of the business anymore. But does your business have a track record of being able to work without you?

There are countless examples of businesses that are growing and profitable, only to burn down whenever their superhuman owner takes a two-week vacation. A business like this is not going to be attractive to a buyer. While he could try to keep you around, you and he will have differences in how to run your business going forward. A new investor will want you gone and needs to know that your business can survive without you.

In order to convince investors that everything will be fine, you must delegate. Do not hesitate to leave important tasks to trusted employees, and make sure that you have someone who can fulfill your responsibilities when you are gone. You should have someone like that regardless of whether you intend to sell a business, but it becomes all the more crucial when you are intending to leave.

Inc has a few tips for how you can do a better job of delegating. Once again, delegation as well as everything listed above is part of building a thriving business in general. It is by building a business that you can attract investors and cash out with the maximum value.

Photo credit: Shutterstock / mavo

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