Every business has some value to someone else. Why entrepreneurs don't know this amazes me! When I look at the minutiae that is sold daily on sites such as craigslist, I am shocked to see how many entrepreneurs just close the doors on their business because they don't believe they have something to sell.
Every business has something to sell! What you do to prepare and plan for a sale is required of you as the entrepreneur! Here are 3 tips to get you there:
(1) Customers/database
Every business has customers - old customers, new customers, prospects, and vendors. Keeping adequate records of how to reach these individuals, who in one way or another, have come in contact with the business is critical to the value of the business. And, please don't tell me your database is on 3 x 5 cards in a file cabinet in the basement! This is 2011 and if you are in business you need to computerize your database. If you aren't computer literate - get an intern at the local high school or college to do it for you. Customer information is valuable to a potential buyer. The more information you have the more valuable it is. But, it must be transferable to a new owner if you expect it to be worth anything. So, begin today in capturing as much information as you can about your customer and vendors. Even the oldest profession in the world is known to keep excellent customer records - why not you.
(2) Income and Expense Records
A potential buyer wants to know how much it costs the business to operate. The basics are important. Don't tell me you have no operating costs because your landlord is your brother-in-law and he doesn't charge you rent and your billing/collection manager doesn't get paid because you barter babysitting in exchange for his/her accounting expertise. These are expense items that a business must pay in order to operate the business. If you are the only employee of the business, don't tell me you don't need a salary because your spouse makes enough for both of you. A potential buyer wants to know if (s)he can make a living from owning and operating the business. You need to show expenses that make sense for the operation of your business if you want to sell it. You need to prove that there is enough income over and above expenses (profit) that a new owner can pocket when they own the business. This sounds so simple but many entrepreneurs do not take the simple approach of keeping clean books and records. A potential buyer wants to know where the money goes when it comes in and where it goes when it goes out. If you can easily explain this and demonstrate that more money comes in than goes out you WILL be able to sell the business.
(3) Core Competency (what does the business do well?)
Now, you would think that this third tip would be the simpliest of all - however, many entrepreneurs have trouble explaining what is unique about the business. Here are some examples:
a hair salon may position itself in the marketplace as the best haircolorist in the region. By focusing their marketing on doing haircoloring and employing those that have an expertise in this area, the business stands out from other hair salons in the region. OR:
a service station may position itself in the marketplace as the most convenient and inexpensive place for oil changes. By branding itself as the place to go for a quick oil change service station it separates itself from other gas stations in the area. OR:
a retail boutique may specialize in gifts for the special moments in life: birth, weddings, bridal and baby showers providing an online gift registry so that out-of-towners can purchase that special gift from a local merchant.
These are just three suggestions for three different, yet very general businesses, that can be positioned as unique with strong core competencies. If the entrepreneur can't express and demonstrate what makes the business special and unique why would anyone want to buy it.
Whether or not you think you will ever want to sell your business - start today by implementing these 3 simple tips. You'll be taking the first steps in planning an exit strategy --- and as the old adage says: "he who fails to plan, plans to fail".