A Common Goal of Successful Business Owners

A Common Goal of Successful Business Owners

Prepare the business for a sale even if no intention to sell currently or in the future.

John Nieuwenburg W5 Consulting

Do you think this goal is irrelevant? Are you certain that it does not apply to you as you have no plans to sell your business at all, or any-time in the near future?

If this is the case, let me ask you another question.  Do you obtain medical insurance for you and your family only if you plan on getting sick?

After all, most of the events we insure ourselves against will thankfully not take place, but we cannot take the risk of betting on that. This could be the homeowner who has paid for earthquake insurance for 20 years without a tremor causing a single water glass to break. However, he could not imagine skipping the policy to save money and face the risk of the home being destroyed at full loss if the “Big One” hits.

What do you mean by creating a successful business that is independent and prepared to sell?

Simply it means to structure your business so that its value can be seen in the eyes of one or more buyers. This is important as less than 10% of SMEs successfully sell.  What this means is there are numerous profitable businesses that no buyer wants a part of so the owner will never be able to capture a significant portion, or the majority, of the intangible value he has built.

So unless you plan on working in your business until the day you die, you will have to consider an exit of some sort.

By preparing to sell from now (even if you do not intend to actually bring the business to market anytime soon), you will position your business to provide you multiple options when it does come to exit.  That can mean passing along a well-functioning business to your children (instead of a lemon that prematurely ages them as they struggle to deal with its inherited issues and problems), selling your business at a premium (due to multiple and/or strategic buyers) or other options in between (minority sell off, etc).

This can also mean if the unexpected should occur (such as death or disability), your business will not shut down or lose all its value if you are unable to work or not around at all.

It’s more than just a Successful Business Exit in the Future

Although preparing to successfully exit should constantly be on an Owner’s mind, the exit itself should not be the only focus. Rather, the owner should focus on whether his business is fulfilling its primary reason as to why it even exists.

The primary purpose of any successful business is to give the owner the lifestyle they want.

That means the Business needs to be providing the owner two benefits:

  1. Time. As an owner, you are free to use your time as you wish and not feel compelled to spend all your time in the business  ..  (you owners who work 70-80 hours a week on your business while your staff does 40-50 know what I mean).
  2. Resources.  As an Owner, your business generates the cash flow for you to be able to spend money on the lifestyle you desire. This could mean a summer home in Europe where you can escape the Middle East heat – all funded by the value you can harvest from your business (obviously do not go overboard and loot your own company).

If you feel any, or both of these are lacking in your business, than you have a business that is not independent.  Instead of owning a successful business that serves you, you have a business that OWNS you.   You are a SLAVE to your BUSINESS and it’s a ruthless master, one you cannot call in sick or quit.

What are some Possible Steps I can take to Create an Independent Business that is Prepared to Sell

  1. Ensure the business does not have to run through you for every decision.  Train or recruit a professional 2nd in command or management team to take over the day-to-day business while you supervise the high level strategy.  Be able to take a 1 month vacation without checking your email and mobile hourly and the business should continue operating and growing while you are “away” – Link to You Proofing your Business.
  2. Where possible transform your revenues from daily ad-hoc consumption to recurring and sticky revenues. Instead of reinventing the PNL wheel daily, have revenues you can receive in the future like clockwork and which you can plan your operations on. Revenues that generate sales even when you are sleeping. Link to Recurring Revenue
  3. Focus on the profitable niches you can defend and charge the prices you wish.  Do not try to sell a bit of everything to everyone one and become the Jack of all Trades and the Master of None. Avoid racing to the bottom in countless price wars on general offerings that become commoditised. – Link to Focusing on a Niche
  4. Diversify revenue so you are not too reliant upon one customer.  You should aim for your largest customer to represent no more than 15% of your total revenues.
  5. If goes without saying you should also try to lessen any reliance where possible on any supplier.
  6. Document and create systematic processes so your business can almost run on auto pilot. This helps you step away from calling all the shots and also ensures that key business functions do not become dependent upon any one employee.
  7. Generate as much cash as possible up front to eliminate any “working capital” funding gaps so you avoid the situation of having to scramble every month to make payroll while waiting for customer invoices to be paid.

Creating an Independent Successful Business that is “Sellable” not only increases its value and your financial options, but is also much more enjoyable to run! It is an asset that will continue to develop and thrive, even if you are on a beach or pursuing other opportunities. A Business that is fulfilling its purpose is allowing you to live the lifestyle you want and spend your time on the real important things in your life.

So is this hidden goal of successful business owners relevant to you? Find out how your business stands on the 8 key drivers of business value compared to nearly 60,000 other SMEs and start from now to take control of the lifestyle you desire.