Right now, it can be hard to imagine either buying or selling a business, but there has never been a better time to turn your business into an asset. An asset that works for you. Start by answering this question: If someone offered you the opportunity to buy your business, would you want to buy it?
The first thing you would do is evaluate if it’s a good investment. You’d find out if the business can run without taking all your time, which means a strong team is in place. You would make sure it’s profitable, with positive cash flow. It would be worth much more to you if the business model was based on recurring revenue that comes from scalable solutions instead of services. You would also confirm if the business is a leader in a clearly defined market. A business like this would be one you would love to own!
Unfortunately, for many entrepreneurs, that’s not the way your business runs now.
Imagine how you’d feel if you want to sell your business, but no one wants to buy it. Or you get an offer that’s not enough for all the years (decades?) you poured into it. The worst thing that can happen as an entrepreneur is to be desperate to exit and have a business that’s not sellable. A business like that is a liability because you’re trapped.
This almost happened to me. After 15 years of building my technical consulting company, I was exhausted. I was ready for an exit, and that’s putting it mildly. I was ready for an escape! But I found out the hard way no one was really interested in my services company. That’s because most of the time, services companies are highly dependent on people and are difficult to manage and scale. And most entrepreneurs own services businesses.
One of the biggest problems with professional services firms is the amount of time spent understanding the client’s business, solving their problems, and meeting the client’s needs. These things generate revenue but don’t build an asset. Instead, imagine developing standard solutions which solve the primary problems for a specific type of client – your precise target market. The solutions you develop become your company’s intellectual property, which you market and teach to the client.
Instead of each client explaining their business to you, you find a niche you understand very well and then show them how your solution solves their problems. Your team trains the client rather than the client training you. Your company builds an asset rather than just generating revenue.
I’ve seen entrepreneurs perform contortionist acts in “service” to their clients, often to the detriment of the business. They don’t want the client to leave because they “need” them. The business owner even takes on clients and projects that aren’t a good fit because they have the capacity and they think they need the work. Again, this generates revenue but does not build an asset. Instead, take that capacity and turn it into an investment in your company. Build solutions that you market like products.
Here’s the secret: make your business so valuable you would want to buy it.
The first thing to understand is that if your business can’t run without you, any buyer will want you to keep working for the company after the sale. Chances are you are exhausted, and that’s the last thing you want to do. But a buyer will not pay top dollar for a company when it’s obvious the owner is burned out. They will wonder why they should buy it at all since it took the life out of you. No one wants to take over your problem child. It will be clear to a prospective buyer that you don’t have a solid system or management team, and that represents a risk to them.
All the reasons that make your company hard to sell make your company hard for you to own. Ask yourself if you would buy your business—if not, start right now to change that answer. Every decision you make about your business from here on out should be based on whether it will increase the value of your company so much that you would buy it.
Do you feel trapped by your business?
Feeling trapped is a story, and the solution is to change your mindset. The way to stop feeling trapped is to decide how you want to think, feel and act. Think of your business as an asset, feel good about the value it creates, and then take action by managing it for growth. Otherwise, you will always be stuck in a lifestyle business, which is another word for a “job.” No one wants to buy a job, and you shouldn’t want to own one either. The way to regain the sense of freedom you had when you started your business is to make your company work for you.
What I decided to do is to turn my business into an asset by focusing on solutions that would scale, and there has never been a better time than right now for you to do the same. When your business is an asset that runs without you, is a leader in a niche market, is profitable, and generates recurring revenue, it will work for you. When that happens, you might not ever want to sell it. Either way, you win.