Just as with selling a house you want to make sure that every aspect of your business is appealing from the indoor and outdoor aesthetics to its location. The things you first see when looking at your business are exactly what potential buyers will see and it is these things that could make or break the deal. If you feel your business could benefit from some improvements but don’t know where to start, here we have 3 simple steps to help you on your way.
As your business grows you will inevitably take on more staff but as you do it is important to make sure you adapt. Having the adequate HR infrastructure in place within your business is extremely important but even more so when you are trying to sell. As a smaller business you may feel that your slightly more informal management approach works best but you may find this to be a liability when looking for a buyer.
Acquirers tend to have existing businesses, so it might be worth looking into what human resource polices they have it place to ensure yours align as much as possible. A lot of the time these policies consist of key written documents such as;
Collating all the important documents and information regarding the day to day running of your business is a sure fire way to impress any potential buyer. By having all of your business procedures, financial information and other intellectual capital in one place you are likely to attract more interest.
This file containing all of your information should include the following;
Every business has unique selling points that buyers should be made aware of. Not only does the documentation of this make you seem more professional, it also makes your business more attractive. These assets may include the following;
Protecting your business from the competition allows you security in the market and gives you better control of your pricing. It is a lot harder for smaller businesses to find ways to create this barrier so they have to be a lot more aware of their market. There are a number of popular ways that you can help protect your business, some of which have been listed here.
Whilst most business owners don’t bother at looking into ways to be certified and awards they may be eligible for it is worthwhile. The initial process may be a little time consuming with paperwork and training for your staff but in the long term it will protect you. Certification will act as a sustainable barrier again your competitors and will help your position in the market.
Customer loyalty is key for smaller businesses as they will jump to your defense in everyday situations and most importantly online. Having good reviews online is especially crucial now as it is where most people will look to get a feel for your business. Loyal customers will be the first to leave a glowing review and more often than not refute others unsatisfactory claims against you.
Whilst smaller businesses would not have thought to integrate Customer Relationship Management software into their systems it is something that can set you apart from competitors. There are a number of free trials you will find online for this software to help you see if it’s beneficial for your business. If ultimately it helps you improve your understanding of customer relations and growth then it is a worthwhile cost.
As a smaller business owner this last tactic is not something that should necessarily be your main concern but it is something to bear in mind. A lot of the time a company’s success can be defined by how customers use the name of their service/product. For example most people call a vacuum cleaner a Hoover which is a brand and the same with Cola drinks which are referred to as Coke. By the company name/service or product becoming a verb it creates a huge barrier between them and the rest of the market.
In protecting your business you differentiate yourself from your competitors, in turn this allows you to have control over pricing, increase your growth and if you’re planning on selling your business it makes you much more appealing.
A recent survey by The Sellability Score found businesses that can perform well without their owner for a period of three months are 50% more likely to receive an offer to be bought, when compared to businesses that are more owner dependant.
There is no better justification for taking a blissful, uninterrupted holiday! Simply the better the company performs in your absence; the more valuable it will be when you’re ready to sell.
To gauge your company’s ability to handle your absence, start by taking a vacation. No computers, emails or mobiles. Upon your return, you’ll probably discover that your employees got resourceful and found answers to a lot of the questions they would have asked you if you had been just down the hall. That’s a good thing and a sign you should start planning an even longer vacation.
You’ll also likely come back to an inbox full of issues that need your personal attention. Instead of busily finding answers to each problem in an attempt to clean up your inbox, slow down and look at each issue through the lens of a possible problem with your people, systems or authorisations.
Systems – Next, look at your systems and procedures. Either the issue should have been dealt using your current systems or re-write them to deal with the issue. The best systems are hardwired and do not require human interpretation; but if you’re not able to lock down a technical fix, then at least give employees a set of rules to follow in the future.
Authorisations – Are you the bottleneck in your own company, if you’re trying to control costs too much. Employees may know what to do, but do not have the any means of paying for the fix they know you would want.
For example, you could authorise your customer service people to spend up to £50 provided it makes the customer happy.
Can you allow an employee to spend a specific amount with a specific supplier without your approval? Or perhaps an annual budget they can spend without seeking your approval, letting them get on with the job they are employed for.
Given the problems that may need to be sorted on your return, taking a holiday may seem more of a hassle than it’s worth. However, if it shows you the issues to turn into systems and training to solve problems, the vacation is worth its weight in gold. Your company will increase in value, as it becomes less dependent on you personally.
Do you own a business you could sell? Find out by taking the 13-minute Sellability Score questionnaire: Get Started now
The Business Partnership have been helping business owners sell their businesses since 1979. You can learn more about The Business Partnership here.
Business owners often believe that they are their business and that it has no value without their personal expertise.
So if this is you, and what you sell, like a PR consultant or plumber, is your experience and knowledge, how do you change your business from a lifestyle into a valuable asset – one that can be sold.
To grow a knowledge-based business, it first has to be teachable so your employees can learn how to deliver the service. So how do you condense years of school and on-the-job learning into a few weeks of employee training? Especially as the more specialised and therefore valuable your knowledge, the harder it is to hand over work to employees.
The key to scaling a service business is often found in prevention; simply stop customers from calling you in the first place. Start selling prevention rather than the cure.
For example a plumber can teach an employee routine maintenance of a boiler, much easier than fault finding.
A dentist takes years to acquire the skills to successfully complete a root canal, but it’s relatively easy to train a hygienist to perform a regular scale and polish.
It’s no trouble for an letting agent to hire someone to clean the gutters once a month, but repairing a flooded basement caused by clogged gutters is much more difficult.
Only a very experienced car mechanic can overhaul a seized engine, but he can train a lot of junior mechanic’s to change the oil and prevent the problem.
In a IT support company, only the experienced engineer can restore a customer’s network after a virus infection, but preventing the virus by installing and maintaining the latest anti-virus software is a simple task for a much less experienced employee.
The added benefit of building your business in this way is that customers will often pay regularly for maintenance services, providing regular
To build a valuable business – and sellable one day – sales need to continue after you’re gone. In most businesses this responsibility lies with the business owner and they often replace themselves with a superstar salesperson, but that’s often a trap.
If you replace yourself with a single salesperson, you’re simply swapping a dependency on you for dependence on a sales rep, and your business is no more sellable as a result. When we analysed the users of The Sellability Score* (a self-assessment test business owners use to understand how to drive up the value of their company) we found that businesses that could easily replace their top salesperson are over twice as likely to get an offer to buy their business when compared to those companies reliant on a single salesperson.
Therefore to build a valuable business your company needs a sales team – not just a one salesperson. But how do you build a sales team? Wouldn’t it be more prudent to hire a sales rep first? An emphatic no! Hiring a single sales rep will only keep your business reliant on one person, so you need a team and the faster the better. Here are our 3 top tips for building a sales team on a budget:
Good sales reps are expensive to both recruit and train. In order to avoid running out of cash before they are fully ramped up, can you change your terms to charge some or your entire invoice up front. If you already stagger your billing, simply ask for a larger payment up front. If half your customers agree, you’ll have more cash to build your sales team and more time for them to train up.
You might also consider introducing a subscription or service contract model, as most people understand that subscriptions are paid up front. Can you get an annual contract with an incentive for full payment in advance? For example, if you charged £700 p.m. for a maintenance contract, but offered clients a £7,000 p.a. option, provided they paid up front, you would have £7,000 in the bank for each contract sold. If a fully effective sales rep is able to sell ten service contracts a month, could a new rep not sell three? If so, a new rep should be able to quickly get to the point where they are covering their monthly cost to you.
Sales territory is an asset of your business and, like any reward, it is easy to give and harder to take back. Look at carving up your market into sales territories that provide enough opportunity for each rep to make money. It’s okay to leave a territory unfilled for years, so avoid the temptation to give the territory to another rep, as it will become impossible to take back when you’re ready to fill the position.
At the start hire two sales people, if you can, not just one. Salespeople thrive on competition. If you can demonstrate to a buyer that your company has sales driven by a team you will have a much more sellable business. Also if you’re charging up front or on a subscription model, you should quickly get to the point where each sales rep is at least covering their costs to you.
Replacing yourself as your company’s rainmaker is the right strategy; but avoid trading one weakness in your control, i.e. you, with one that depends on someone else. Instead, hire a sales team and watch your company – and its value – grow exponentially.
Paul Dodgshon is a Regional Partner in Business Partnership, who have been helping business owners sell their businesses since 1979. You can learn more about Paul and Business Partnership here.
*The Sellability Score is a cloud-based software tool that allows a business owner to assess the “sellability” of their company. The researchers at The Sellability Score analyse the data from 2300 companies around the globe in order to understand trends in the business market, with a particular focus on the liquidity of privately held businesses.
You can take yours by clicking Get started now.
Whether you’re selling, buying, or planning for the future, Business Partnership is here to help. Contact us today to speak with your local Regional Partner and start your journey toward success.