The slogan “Be all you can be” gets our attention because we all know we seldom realize our potential. Business owners are no exception. Is your business everything it should be? Do you envision the changes you need to implement but fail to carry through? Or have you retired mentally? Do you find yourself overlooking problems that you would have resolved in earlier years?
If you have contemplated selling your business in a year or two, you should start asking these questions today. What you do in the 365 days before the sale will not only boost your selling price but also give you the satisfaction of knowing you left your business focused and moving forward.
The beauty of preparing for a sale is that the five-year strategic plan becomes a one-year plan. Kazuo Inamori, founder and chairman of two of Japan’s most successful companies and a fan of sumo wrestling, advises business owners to “wrestle in the center of the ring.” By that he means to act on challenges immediately and not wait until one is pushed to the edge of a deadline. Waiting until thirty days before the sale seriously limits the scope of any improvements that can be made.
Dr. Min Basadur in The Power of Innovation explains that you cannot solve a problem without first clearly identifying it. Yet negative perceptions cause us to avoid problems rather than seek them out, or at least procrastinate in handling them. The most successful business owners, however, excel at problem finding.
To get started on a one-year plan to sell, try to answer these questions:
Faced with these questions, one business owner reluctantly acknowledged that his good friend and director of sales was not suited to handle the company’s important new sales effort. To make every day count, he needed to be replaced immediately. While it was not easy, he recognized that the dirty work should not be left to the buyer.
Another business owner answering these questions identified a particular market of his company as ripe for exploitation, yet admitted that much of the company’s time, effort and resources were being consumed in servicing markets that were no longer highly profitable. Once he accepted a one-year window to make strategic improvements, he flushed the marginally profitable market that was draining all his resources and redeployed those resources in the more profitable market.
When an owner really reflects on these questions he will often discover that a perceived strength is actually a weakness. The large customer he brags about may account for a sizeable portion of his business, increasing the risk of failure should that customer go elsewhere. The key salesperson may not be so valuable if he can leave at any time and take much of the business with him. Even the owner himself may be responsible for depressing the value of the business if it depends upon him too much for its success.
Your answers to these fundamental questions will help you focus on the most important strategic issues in your pre-sale preparation. This is not to suggest, however, that getting your house in order is not important. Having audited financials, employment contracts with noncompetes, and supplier and customer contracts eliminates much of the uncertainty that can jeopardize a sale or diminish the perceived value. Also, by resolving lawsuits, employment disputes and tax issues prior to the sale, the buyer does not have to wrestle with thorny issues that could lead to the buyer’s disenchantment with the business.
While it is important to attack problems and seize opportunities, do not delay selling until you have completed all your work. The right buyer may be persuaded by the opportunities you have identified. Just do not expect a buyer to pay extra for opportunities you have identified but not initiated. Buyers pay for performance, not promises!
If you are considering selling in one to two years, ask Anderson LeNeave to help you develop a pre-sale strategic plan. Whether you ultimately sell or not, the pre-sale plan will enhance your business.