You may not be ready to sell your company. I hope for most of you that’s true. At the same time, you want to make sure your company is always ready to be sold. In today’s video I’m talking about why having a sale ready company is important and some things you can do to get your company ready.
A sale ready company is a company that has enough excess cash flow that makes your company attractive to someone else as a successor owner. Watch this week’s video to learn more and while you’re at it, after you watch the video let me know what you think about having a sale ready company in the comments below.
You know, in every industry, there’s a vocabulary that’s formed that unique to that industry. Most of the time, this unique vocabulary is called jargon. Most of the time, I really really hate jargon because you don’t understand what I mean. And if I have to fall back on jargon, there’s a really good chance I don’t understand the concept well enough for you to understand what I’m talking about.
Now today’s video isn’t about jargon, but it is about a term that you might consider jargon. Now you might be curious about what that term is. Well, it’s called having a sale ready company, and that’s what this week’s video is all about.
You know, a sale ready company is just that, a company that is ready to be sold to somebody else. I want you to know why it’s important to have your company ready to sell all the time.
So let’s jump right in.
- Number one: you know, if you have a sale ready company, it’s one that’s creating enough excess cash that the buyer would find attractive. You know, if your business isn’t creating excess cash, and a reasonable amount of excess cash, there’s not a really good chance that you have anything to sell. And the reason is, when a buyer buys your company, what they really want, although they’ll tell you all sorts of things they do want, but what they really want is the cashflow from your business. So it’s really important. If you’re gonna have a sale ready company, the number one thing you need to have is excess cash. Without that, anything else you do is not gonna get you the result that you really want.
- Number two: your business has to be values-led so all your stakeholders, your customers, your employees, your vendors, and the community know what your company is about, and what drives it. Now I have to tell you something that’s really important here. Your buyer, if you decide to sell your company after you get it to be sale ready, is not gonna really care about your culture, because frankly, they’re gonna have their culture put on to your business. But here’s what makes a sale ready company really happen. You say you have a company that’s really attractive for somebody else to buy. And I can tell you for a fact that if you have a values led company, it’s gonna be way more sale ready, and way more valuable, and way more attractive to somebody else. Now if you decide to keep your company, having it be values led is really important because it tells everybody in your community what you’re about, what’s your important, and what you should be doing about it. So there you are, number two is having a values led company.
- Number three is, you have to make yourself operationally irrelevant. Now this means you have nothing to do with the day-to-day operation of your business. And no matter what a buyer ever tells you, they really aren’t interested in you, they are interested in your business, they are interested in the cash flow, they are interested in your customers, they are interested in your employees and managers, just not you. That means that if you take yourself out of the day-to-day operations, it becomes easy for a buyer to figure out that you’re the type of company that they want to own, and it’s gonna be relatively easy for them to integrate your company into their business. Oh by the way, if you make yourself operationally irrelevant in your business, it also gives you lots of options for how you can spend your time, whether you decide to sell your business or not.
- So number four, your business has a recurring revenue model so your company can actually predict and know what your future sales are going to be. This is a biggie, and it’s a biggie for you whether you keep your company or you sell your company. But if you sell your company, it’s absolutely huge, because a buyer wants recurring revenue. If they’re buying your business, they want to know that they can have that revenue be created on an ongoing basis over and over and over again, and that’s what gives your company value for a potential buyer. It also gives you value for yourself, so you don’t have to really worry about where’s your sale gonna come from when January first walks around. You know you have recurring revenue, so you can say well, at least I have this much business coming in the door, and then you can work on what you can do to improve that, whatever X is coming in your door.
- So number five, you’ve systemized your business so all of your business functions are done in a similar way. This is important for your customers so they can expect, know what to expect to get from your business, it’s important for your employees so they know what the definition of excellence is. So when you systematize your business, you make your business more predictable. The more predictable you make your business, the more valuable it is for someone else to own it, it’s more valuable for you to own it yourself.
- Then finally, number six. You know what it takes to become financially free from your business, and you are or have taken the steps to make sure this is a reality for you. Really a big thing. You don’t want to be selling your business, and then come back three, four, five years later and realize you made a mistake, you didn’t get enough money, and you weren’t financially free from your business when you sold it. I want you to be financially free from your business before you even think about selling your company. So a big part of making your company sale ready is making sure the four boxes of profit are filled, and the four boxes are: lifestyle, an emergency fund, having enough money for a fully funded growth program, and enough money for a fully funded retirement program.
The funny thing is, once you have your company be sale ready, you’re not going to want to sell your business. You’ll be making too much money, and having too much fun to sell.
So what do you think about having a sale ready company? Is this something you find attractive?
Why don’t you scroll down below this video, and let me know what you think in the comments below. Hey, and while you’re at it, DOWNLOAD a Free eBook on Simplified Business Budgeting. You’ll find a simple way to plan for your business that everybody will actually use.
This is Josh Patrick, you’re at The Sustainable Business. Thanks a lot for stopping by. I hope to see you back here really soon.