Ready to sell: Building value in your business
Your Business Stage
What does a buyer want from your business? Transferable assets.
A buyer naturally seeks value from your business as either a strategic or financial acquisition.
A buyer wants your business because they expect it to continue to perform as well as it does now (or better) under their leadership.
To obtain the best value for your business you’ll need to convince the buyer that your business offers truly transferable assets ready to be enjoyed by the right bidder.
Tangible and intangible assets
Transferable assets can be both tangible and intangible:
• Tangible assets are your equipment, facilities, inventory and other physical assets. The value of these assets can be determined by looking at the sale price of similar assets.
• Intangible assets may be harder to define but will often be the primary source of value in your business. Intangible assets include service offers, goodwill, patents, the business processes you have created and the team who delivers them.
Standardized Business System
A standardized business system will assure a buyer that they can achieve the same results that you have achieved.
A buyer can purchase physical assets from anyone, but the intangible assets of your business are likely unique. The key to creating transferable value in your business is to combine tangible and intangible assets into a standardized business system.
A standardized business system will drive the real value of your business because it allows your business to operate without you personally. Your business will be less attractive to a buyer if it cannot function without your oversight, your knowledge or your business relationships.
Your standardized business system should incorporate all the processes required to create, sell and support your product or service. Your standardized business system should be run by other people, such as your key employees or vendors.
Do some housecleaning
It’s unlikely that every service your company offers will fit into your standardized business system. Take a hard look at all divisions within your business to identify assets or activities that might best be removed from your business before it is offered up for sale. Keep any customer services that:
• Are most profitable.
• Need to be purchased frequently.
• Can be sold by people other than you.
Develop other assets to increase value
Having identified your key transferable assets and the standardized business system which drives value, take a look at what products and services didn’t make the cut. Do they have the potential to become key transferable assets, or should they be dropped from your offering because they are a distraction from your core business?
Develop what has potential and cut what doesn’t so that you stay focused on building your company’s value from the perspective of potential buyers.
You’ll also find helpful information in the book, Built to Sell: Creating a Business That Can Thrive Without You, by John Warrillow.
Why will someone buy your business? Have you established transferable value? Please share your thoughts below.
By Roger Pierce