At the start of a new year, it’s likely that you’re focusing on your business and financial goals if you’re a business owner. Like most owners, you have a profit goal you’d like to reach, and you may also have a top-line revenue number in mind.
While these are important objectives, there’s another goal that may have an even bigger payoff: building a sellable business. Regardless of when you plan to sell, keeping this objective in mind is key to achieving your long-term goals. Here are five reasons why building a sellable business should be one of your most important goals this year.
More Freedom in Your Day
How well would your company perform if you were unable to work for a while? As long as your business is dependent on you personally, there’s not much to sell. Making your company less dependent on you by building a management team and creating processes for employees to follow means you have the ability to spend time away from your business and have more time in your day.
Time for Work You Enjoy
Most business owners spend the majority of their day knee-deep in details like government forms, customer issues or auditing expenses. In order to sell a business though, these exact types of tasks need to be handled by managers and employees, not the business owner themselves. By delegating tasks that drain the enjoyment out of owning your business, you’re able to spend more time on strategic thinking and big picture ideas that make your company more valuable in the long run.
Greater Financial Freedom
Each month, you might open your brokerage statement to see how your stock portfolio is doing, not because you want to sell your portfolio, but because you want to know where you stand on the journey to financial freedom. Creating a sellable business also allows you peace of mind. You can be confident you’re building something that, just like your stock portfolio, has a financial value that you’ll be able to benefit from in the future.
Proof of Profitability
There are some things in life that take time, no matter how much you want to rush them. Making your business sellable often requires significant changes, which will take time to put in place.
A prospective buyer is going to want to see how your business has performed for as much as three years after you have made the changes required to make your business sellable. If you want to sell in five years, for example, you need to start making your business sellable now so the changes have time to be implemented and showcase their profitability.
The Gift of Legacy
Imagine that your first-born graduates from college, and as a gift, you give him or her your prized 1967 Shelby Ford Mustang. Your child takes it on the road, but after a few miles, the engine starts smoking. The mechanic takes one look under the hood and declares that the engine needs a rebuild.
You thought you were giving your child an incredible asset, but instead it’s an expensive liability they can’t afford to keep. They also can’t sell it without feeling guilty.
You may be planning to pass your business on to your kids or let your managers buy into your company over time. These are both admirable exit options, but if your business is too dependent on you, and it hasn’t been tuned up to run without you, you may be passing along a jalopy.
Whether you plan to sell soon or not for many years, focusing on these benefits will help you build a company that’s valuable well into the future.