Why You Should Build a Business You Can Sell (Even if You Never Plan to Do So)

Having sold a business in the past (a bookstore), I’ve been through the process and it’s not easy. There are contracts and details and a heck of a lot of paperwork. The reality is that when I started the business I had no intentions of ever selling it; I assumed I would run it forever. But plans change and thankfully I had built the business to a place that it could be sold. Unfortunately, many business owners don’t think about these details and end up with businesses that look more like hobbies than assets.

Even if you never intend to sell your business, there are many lessons you can learn from building your business as an asset. Following are some basic guidelines that you would need to sell your business. These strategies will also help you build a more stable and successful business in the long run.

Show a Profit

One of the most important details in the sale of a business is how much profit the business generates year after year. Buyers want to know that profits have increased each year. If your profits are flat or declining, it could certainly be due to the state of the economy. But stay focused on increasing profits so that your business looks like an attractive investment.

Complete Financial Statements

One of the best investments you can make in your business is a good bookkeeper or accountant. Your financials should be orderly and complete. A business could not be sold without several years of accurate financial statements (which may also be audited by the buyer’s accountant).

Runs Without You

This is a big weakness for many small businesses. The business must be such that another owner can step in and run it without you. If you are the heart of the business because you’re the primary service provider (such as a freelance designer), then you don’t have a business you could sell. A better option would be to hire other designers that also perform the work so that you’re not the only one delivering the services. The same is true if your business is built on your personal relationships with clients. If you left would your business still run? If the answer is no then look for ways to diversify your sales process and avoid being at the center of everything.

Documented Processes

Keeping in mind that a new owner should be able to pick up where you left off, all of your processes should be documented. The easiest way to do this is to create an operations manual that details everything that you and your staff do. Regardless of whether you sell your business or not, documented business processes are beneficial as your business grows since you can use your documentation to help train new staff.

Itemized Inventory

If you sell products, you should already have a grasp on your annual product inventory. But in order to sell your business, you also need to provide an inventory of assets. Those can include equipment, furniture, fixtures, automobiles, real estate and computers. This information combined with your annual revenue and profits will be used to place a value on your business.

Next Steps

Of course these are just the basics and if you’re seriously considering selling your business you should read some books on the topic and speak with an attorney who specializes in these transactions. It can also be beneficial to hire a business broker. Brokers work much like real estate agents, helping to find buyers and managing the transaction.

And if you don’t currently have plans to sell, it’s still important to build a stable business. There’s a reason that buyers care about financials and profits and operations—these factors demonstrate that a business is successful. Build your company with these important details in mind and you will know that you have established a strong foundation for future growth.