Whether you plan to sell your business soon, eventually, or never – you need to manage it as if it could happen any day.
Some might see the sale of a business as the ultimate goal. Many might not have given it much thought yet, as if it seems so far off into the future.
No matter which is the case, a business needs to be managed as if it could be sold at any minute.
Why? There are two good reasons.
First, managing it that way brings discipline and formality to your operations and financial priorities.
Second, you might find yourself suddenly needing to sell it; at that point, it would be too late to think about how to maximize its value and ensure it is indeed primed to be sold.
As far as discipline and formality goes, if you run your business as if it is for sale, you will assume that everyone is watching, and your policies, procedures and financials will reflect that.
You will think that, at any moment, someone could be in your space, looking at your books, analyzing your sales trends and reviewing cost structures. You should already be doing all of this for your own benefit, but the key is to do it with the eye of an objective third party.
Try walking into your business tomorrow pretending it belongs to someone else and you are considering acquiring it.
What are the first impressions? Is it clean, organized and professional? Does it employ quality staff, with good morale and loyalty? Are products competitive and trusted? Does the brand have value? Are the books up-to-date and attractive, or is it being run like a personal piggy bank?
Most importantly, is it turnkey? Is it being run in a way that the owner has essentially delegated himself or herself out of a job, and the day-to-day business could run without him or her – leaving a truly valuable, standalone operation to which the owner might continue to contribute creatively and at a very high level only?
Or, is the owner a slave to the business, with every minor detail dependent on him or her? The latter makes for a far less valuable business which, in the worst instances, would not be sellable.
As far as needing to sell your business, as opposed to expecting to, I often try to shock entrepreneurs into a reality check with the following scenario:
You love your business. It offers a sense of personal and professional pride. It is a part of you, like family, and still has so much room to expand, profit and provide. The only thing that could drag you away from your business is retirement, and you're not convinced you'll ever even want to do that – slow down maybe, but never stop. Your business is your baby.
Only it's not. Let's say you have an actual baby – a child who has just been diagnosed with a life-threatening illness.
That would change your priorities overnight. Not only would you be unable to commit the time you need to the business, but you'd see it differently – as an asset that needed to be liquidated to provide that time, as well as financial resources, to focus on your child's health.
And if your priorities must change so quickly, even if you've made the business independent and self-sufficient, it still needs leadership.
It's a brutal scenario and one I wouldn't wish on anyone. But if you faced it, you'd want to sell your business in a heartbeat. The question is, would you be able to?
The answer: not if the business was too dependent on you. Not if you ran the books worrying about minimizing taxes instead of maximizing profits. Not if you managed cash flow as if the business was your personal bank. Not if…you get the drift.
So, whether you want to sell your business or not, good things will only come if you run it as if it is always for sale. The worst that can happen is that it will generate great returns and be independent enough to allow you to focus on high-level, strategic issues and delegate much of the rest.
If you run your business with that kind of discipline, at least you will have a choice – and that's of value in and of itself.
Special to The Globe and Mail
Chris Griffiths is the Toronto-based director of fine tune consulting, a boutique management consulting practice. Over the past 20 years, he has started or acquired and exited seven businesses.
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