In the course of daily business activities, I spend time at various meetings, conferences, and other organized functions where I meet a lot of entrepreneurs. Inevitably, the conversation turns to, “So, what do you do?” I explain that I help entrepreneurs plan and get their businesses ready for sale. I’m amazed how often I get the response, “Oh, I’d never sell my business. My business is my life!” Really? Are you one of those entrepreneurs that started a business because you don’t have a life and this was how to get one? I didn’t think so, either. Entrepreneurs start their businesses for a wide variety of reasons, but here are the four most common ones and how planning to sell your business can help you accomplish them.
The first reason entrepreneurs start their businesses is because they want freedom. They want freedom to choose the direction the company is going. They want the freedom to choose their hours, their staff, and the products or services the company sells. Somewhere along the line this freedom turned into chains. You can’t really choose your hours because it feels like you’re working 24/7. Vacations mean answering e-mails and sitting on conference calls from home. Once you start hiring people, it seems like you’re constantly babysitting them to get the job done, so you end up doing it yourself.
Few buyers want a company where the entrepreneur is so integral to the organization. They want to buy a company, they don’t want to buy you. By planning to sell your business early, you identify and hire the right people to run your organization. This gives you back the freedom to plan your vision for the company, offer the right products and services to your market, and find the right partners to expand your reach.
The second reason entrepreneurs start their businesses is because they want control. In many instances, the entrepreneurs want their companies to be better than the other companies out there. To do that, they take control of nearly every aspect of the organization. I’ve worked with countless companies where the CEO is the top salesperson. I’ve worked with companies where every decision has to go through the CEO or a top officer. These entrepreneurs want to control who they have as clients or customers. They want control of every detail of the organization so it’s just the way they want it.
Wanting to create what you envision to be the perfect organization is fine, needing to control every detail is not. You can create a company you can be proud of and still let go of the reins. The key is to identify and map out the most important processes that keep your company going forward. These might be the sales process, accounts receivable, or new product development. Buyers want to see documented, repeatable processes that assure the company continues with or without the founder there.
The third reason entrepreneurs start their businesses is because they want financial security. You may not have started your business to make a killing, but you did start it to have a comfortable lifestyle. You may want a nice house in a good neighborhood, send your kids to a great school, or have the money for vacations and retirement. How’s that working for you? Are you making enough to set some aside? Are you making a profit?
If you got a call tomorrow from an interested buyer, would you know where to start the negotiations? Do you know how much your business is worth? How do you know if you’re getting a fair price? By planning to sell your business, you identify the durable competitive advantage in your business. This helps you determine a fair price for your business.
In our next blog posting, we’ll talk about the fourth reason entrepreneurs start their businesses and how it changes their lives. They’re the goal many of you strive to achieve. So the question you want to ask yourself is how would your life change if your business went from good to great. What would you do if you didn’t have to worry about money any longer? See you next week.