The key reason to start a business should be to sell it one day, and the way to become truly wealthy is by buying, building and selling businesses.
A good strategy to adopt is to hang onto your first business for its passive income while you acquire and build up your next business. At this point, your first business should be at a place where it can successfully run without you. This generates a passive income and alleviates the pressure when selling, thereby allowing you can take your time finding the right buyer and negotiating the best deal possible.
Factors to consider when to sell your business
There are a number of factors that influence the ability to sell your business and the price that buyers will be willing to pay for your business. These factors are as follows:
- Strong Consistent Cashflow
One of the most important factors that impact on the “salebility” of the business is the ability of the business to generate strong consistent cashflow coupled with good margins and ideally a large percentage of repeat business
- Assets owned.
Here a potential acquirer will look at which assets are owned by the business, be they in the form of products, patents, registered brands, investments, shareholdings in other businesses that are also part of the sale as well as physical assets (movable and immovable).
- People, Process and Systems
Every business needs systems and good people to ensure that you have a commercial, profitable enterprise that runs without the business owner.
- “Scalability” of the business.
The purchaser, will always want to ensure that the business is scalable so as to ensure that they can extract further value from the business after the business has been bought. Failure to build scalability, may result in the purchaser having bought additional revenue and not future leverage from the acquisition.
- Culture of the Organization.
This is often an area that is overlooked. Research will tell you that around 80% of acquisitions fail because of the inability to fully integrate the respective teams into one cohesive operating unit.
The key to ensuring that your business is saleable, is to start working on the above five areas from the start and to develop these areas over a period of time. That way you are better prepared when an exciting offer does come your way as well as being able to maximise the selling price.