The traditional paradigm of starting a business, running it till retirement and passing it on to your family when you retire is falling out of favour. A new breed of ‘serial entrepreneurs’ are much more focused on the short-term gains that come from turning a startup into a profitable concern that then becomes a saleable proposition.
Naturally, there’s always plenty of press coverage when entrepreneurs hit the jackpot by selling their startups for millions of dollars – such as TechCrunch founder Michael Arrington selling his business to AOL for a reputed $30 just five years after he set it up. But there are plenty of unreported successes, too – business owners who tap into a niche, work hard, sell for a profit and move on to the next project. See our online businesses for sale section for proof of this.
In some respects, even if you do plan to run your business till retirement, it’s no bad thing to approach your venture with the notion that you might want to sell it one day. By keeping its potential value in mind as you go along, you’re actually more likely to spot problems that might impact your business’s profitability, which will force you to keep focused on best practices throughout.
If you already know you want to build and sell, you can create a strong business model from the get-go, using your future sale as a business driver.
You’ll be extremely lucky if you join the ranks of the ‘overnight’ success stories. But that doesn’t mean you can’t aim for a big win. The thing to remember is that most successful start-ups began on a fairly small scale, often solving a problem that the founders experienced themselves. The thing to focus on is creating a business that can succeed by offering something of value – be it a product or service – to your target audience. If you’ve experienced a problem, it’s likely that others have too, so if you can solve that issue at a price that people are willing to pay, you’ve got an idea that you could build into a successful business that you’ll be able to sell in the future.
Target an established market
There’s no shame in piggy-backing on an already established, but expanding, market. Some entrepreneurs do launch an idea into an untested market, but bear in mind you will increase your exposure if you follow this route. The same is true if you launch in a declining sector – even if you bag a large slice of the commercial pie, you’re probably looking at diminishing returns. People worry if there’s a lot of competition in their chosen market but if you look at this another way, it shows there’s a ready-made audience for your products or services. If you can aim to capture your share of customers in a sector that’s on the rise with a differentiated offering, you’ll have the best chance of getting a great return on your investment when you come to sell.
Take care of your customers
It probably goes without saying but if you want to build your business into a saleable proposition, you should look after your customers as if they were the crown jewels. Remember, you’re building a brand that you want to sell on so it’s important to align the very best qualities with your brand values. The way you engage with the people who buy your products or services makes all the difference. How you care for your customers and prospects will help to create followers – and having a trusted brand with a loyal customer base will do wonders for your company’s cachet when you come to sell.
Make it independent
If you’re aiming to sell, make sure you build a business that can survive and thrive without you. Buyers are nervous about acquiring companies that are owner-dependent, as they worry that with too much invested in the figure at the helm, their profits might just take a nosedive when ownership changes. Don’t leave this till the last minute. From the start recruit a talented team and construct a business infrastructure that will show prospective buyers that the company is capable of standing on its own two feet. Automate processes wherever you can and spend time documenting all your business processes so that anyone can see how operations could be transitioned to new ownership without damaging profitability.
Make it profitable
While some buyers specialise in snapping up under-performing companies with a view to turning their fortunes around, most are willing to pay a premium for businesses with a solid track record, recurring revenue streams and the potential to grow. If you’re starting a business with the intention to sell at the best price, you’ll need to demonstrate that your business represents a smart investment with reliable returns. Create a roadmap for the future if you can so that buyers can see where there’s potential for development. You’ll also want to sell at the top of the curve, so keep an eye on business transfer activity in your market sector and take a view on the most auspicious time to sell. It pays to ensure your business is all set to market for sale as soon as you feel the time is right, so keep your paperwork up to date and make sure everything is in place to allow you to move quickly when the time comes.