How to Ensure Your Business Thrives Without You
As a business owner, you may dream of selling your company in the future, but before you take that step, it’s essential to ensure your business is not solely dependent on you. The Value Builder Score research, which involved 2300 companies worldwide, reveals two critical factors linked to the likelihood of receiving an offer for your business when the time comes to sell.
Factor #1: Surviving the “Hit-By-A-Bus” Test
Imagine if you could not work for three months due to unforeseen circumstances. Would your business continue to run smoothly? If your staff and customers rely heavily on you, it diminishes your company’s value to a potential acquirer. So, making your business more independent and less reliant on your direct involvement is crucial.
One way to achieve this is by reducing your time at the office. Avoid working evenings or weekends, and resist responding to employee calls immediately. This will encourage your employees to make more decisions independently, exposing the strengths and weaknesses of your team.
Additionally, you must view your business as an inanimate economic engine rather than something that defines your identity. This shift in perspective is vital if you intend to sell your business one day. Potential buyers seek companies with well-established processes and systems that can thrive without excessive reliance on the owner’s presence.
Moreover, a business that can continue to grow and operate efficiently without the constant involvement of the owner is more attractive to buyers. They are more likely to perceive it as a secure investment with a higher potential for long-term success, leading to a more enticing offer[1].
Factor #2: The Power of a Management Team
Companies with a well-structured management team, rather than relying on a sole manager, receive offers at almost twice the rate. A strong management team demonstrates the business has effective leadership, making it more appealing to potential buyers.
If you lack a management team, consider hiring a second-in-command (2iC) to help balance the demands of running your company and advance your targeted exit time. Implement a four-step plan for hiring a 2iC, as advised by Bob Sutton, an expert from Silicon Valley:
- Identify potential candidates from within your organization. Internal candidates tend to outperform external leaders unless the situation is critically unsatisfactory.
- Give your 2iC prospects a unique project where they can showcase their leadership skills to you and the rest of your team. Their excellence will be apparent to your team, making the selection process more transparent.
- Communicate your choice to the rest of your team if you pick a 2iC from an internal pool. Simultaneously, show appreciation for the contributions of those you passed over, demonstrating how much their efforts are valued.
- Shift your management style from being a direct manager to acting as a coach. Encourage the 2iC’s growth and development by asking more questions, listening more, and reducing your time spent on explicit directives.
Having a solid management team in place adds tremendous value to your business. Potential buyers perceive it as a sign of stability, efficiency, and the ability to continue operating effectively even after the current owner has exited the company. This gives them the confidence that the business will maintain its success and profitability in the long term, making it more likely for them to make a generous offer[1].
What Does Value Mean to a Potential Buyer?
For a potential buyer, the value of a business goes beyond just financial metrics. Of course, revenue, gross profit, and cash flow are critical factors, but they are not the only ones. Business owners must understand that buyers seek a well-organized, sustainable, and adaptable business model with the potential for long-term growth.
When your business is less dependent on your presence and expertise, it becomes more attractive to buyers. They see it as an autonomous entity capable of thriving without relying solely on the owner’s skills and knowledge. This independence reassures buyers that the business will continue to operate efficiently even after the acquisition, reducing the perceived risk associated with the investment.
In contrast, a business heavily reliant on the owner may raise concerns for potential buyers. They may worry that the owner’s departure could lead to a significant drop in performance, potentially jeopardizing their investment.
Furthermore, a business with a strong management team showcases capable leaders who can maintain its success after the owner’s departure, reassuring buyers that the company can withstand potential leadership changes and continue its growth trajectory.
Ultimately, potential buyers seek value in businesses that offer stability, growth potential, and the ability to adapt to market changes and challenges. By ensuring that your business can thrive and add value without you, you position it as an attractive investment opportunity, commanding a higher offer price and enhancing your chances of a successful sale[1].
Conclusion
Creating a you-proof business requires careful planning and deliberate actions. By reducing your direct involvement, developing a strong management team, and implementing the above pro tips, you can build a business with lasting value and attract potential buyers who see it as a secure investment.
Remember, buyers seek businesses with sustainable growth potential and the ability to operate independently of the owner. A business that can thrive without you will secure a higher offer and demonstrate your successful legacy as a business owner. Take the necessary steps today to ensure your business is you-proof and ready for a thriving future[1].
Sources: [[1](https://blog.hubspot.com/sales/how-to-run-a-business
**IMPORTANT DISCLOSURE**
Arlington Wealth Management is a Registered Investment Adviser (“RIA”). Registration as an investment adviser does not imply a certain level of skill or training, and the content of this communication has not been approved or verified by the United States Securities and Exchange Commission or by any state securities authority. Arlington Wealth Management renders individualized responses to persons in a particular state only after complying with the state’s regulatory requirements or pursuant to an applicable state exemption or exclusion. All investments carry risk, and no investment strategy can guarantee a profit or protect from loss of capital.