Are you brave enough to make your business less and less reliant on you?

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Planning to secure the future of your business, but with you less involved, pays off in many ways.

So, what exactly does the future of your business hold for you, for your fellow business owners and, of course, for your team and your customers as well?

Start to build capital value...

Unfortunately, most business owners fail to build their business in a way that grows its capital value – all because the business relies so heavily on the owner.

As a result, they fail to build in options that support everyone (including themselves as business owners).

It takes bravery to face up to this brutal truth...

It’s unlikely that the author and philosopher Eckhart Tolle was considering the lifecycle of your business when he said:

“The contemplation of one’s mortality... is a liberating act that makes life feel considerably less heavy.”

However, Tolle’s words point to a brutal truth for all business owners – you don’t live forever and you should work out what you want for yourself and for your business.

As Tolle suggests, this ‘contemplation’ (planning) can bring a ‘liberating’ sense of freedom.

Here’s how it can work...

Start with the 4 helping hands here or read on for the full Bitesize Business Breakthrough.

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Freedom is a strong reason...

Even though it’s hard to imagine that you’ll ever want to leave the business you’ve worked so hard to build, for many reasons it makes sense to steadily prepare your business for sale:

The process of preparing your business for sale involves making it less reliant on the owner(s) – you!

Even if you choose not to sell, preparing your business for sale means you create options, bringing a sense of certainty, security and clarity to the future of your business. You also increase the value of your business.

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Take your time, start early...

It’s hard enough simply running a business – product and service creation, operations, delivery, marketing, selling, HR, admin and lots more – you’re already busy.

Adding to this jam-packed mix of challenges and responsibilities can feel daunting. And so it pays to take your time (if you can), which means starting the process of preparing your business to work without you now, before you need to sell!

Seek guidance...

John Warrillow has started and exited four companies, selling one to a listed company. He’s conducted radio interviews with hundreds of entrepreneurs. He’s also helped many business owners prepare their businesses for sale and, in his book 'Built to Sell', he shares his experiences.

Step 1: Focus on one thing...

Most businesses naturally want to do more and more for customers and to create more products or services that customers can buy.

For example, a flower shop starts out selling flower arrangements. They do standard bunches and custom arrangements to order.

Then they start doing wedding and funeral arrangements. They pick up corporate contracts and start selling planters.

They start a care and watering service for the planters.

Now they might as well sell plant pots and silk flowers. Perhaps they could sell coffee and cakes for customers to have while they wait.

Could the florist/plant shop/café become a restaurant as well?

Complexity builds as revenues build, typically making the business more reliant on the owner to manage all the moving parts.

Instead, with a focus on capital value growth AND revenue and profit growth (and these are not mutually exclusive), Warrillow talks about finding your ‘sweet spot’ product or service or ‘standard service offering’:

Productising a standard offering makes it easier to teach others what and how to do all the jobs of creating, marketing and delivering, making the business much less reliant on you and building your capital value whilst maintaining or growing revenues and profits.

Step 2: Get 'cash positive'

Cash is either a stress issue or a comfort issue for your business.

A future buyer will feel the same way. The level of cash stress or comfort you have in your business will directly affect their willingness to buy and to pay what you want.

As you build a strong and attractive standard service offering, you’ll find less resistance to paying in advance or by monthly direct debit.

Even a hairdresser or gardener can set up a monthly direct debit for regular customers who might, for example, get preferential treatment and priority booking. 

A cash-positive hairdresser, unsurprisingly, will be more attractive and worth much more to a buyer than one that simply takes cash at the end of every haircut!

Step 3: Get others to sell for you...

Your business is stronger when you’re no longer involved in the operations, production or delivery of your standard service offering.

However, if you’re still the rainmaker (the one who makes the sales), you’ll find it difficult to sell your business without a long and risky earn-out period.

John Warrillow is adamant that you should hire people who are good at selling products, not services.

Avoid salespeople who come from professional services companies as they will want to reinvent your service for every customer and not just sell your standard offering.

Step 4: More bravery required - stop accepting non-standard projects!

What do you do when you get a large and valuable order for anything other than your standard service offer?

John Warrillow suggests that, if you’re serious about eventually selling your business, you’ll need to turn down non-standard orders. This can mean saying goodbye to some big contracts and perhaps even offending long-standing key customers! How hard does that sound?!

This is most difficult at the start of the process of preparing your business for sale. Because you’re still transitioning your business from a complex multi-service/product business, you may well say ‘yes’ whilst your cash flow and profits depend on all sales.

However, as you build the sales, profits and cash from your standard service offering so that they dominate your business, you’ll find it easier to turn down these non-standard opportunities. This requires bravery and commitment to your capital value goal.

It pays to be aware that your business value is at risk each time you accept non-standard sales revenues:

Follow through on your increasing commitment to your standard service offering and, eventually, customers, employees and stakeholders will realise you’re deadly serious. Buyers will also recognise your commitment and will see greater value in your business.

Warrillow’s experience suggests that 2 years’ worth of financial statements showing you’re wholeheartedly committed to your standard service offering will ensure that your business is extremely appealing to buyers.

Step 5: Launch a Long-Term Incentive Plan for Managers

You’ll appreciate how important a management team is to any acquiring company – they provide business continuity (without you being involved) that builds a prospective buyer’s willingness to pay more and to pay a healthy sum up front as well.

Building a long-term reward plan for key managers that appeals to your crucial team members 12 and 24 months after any sale is key. It’s interesting that Warrillow suggests that it pays to avoid using equity, as it complicates the eventual sale process.

Step 6, 7 and 8: Three moves to make a sale happen

As you engineer your business for capital value there’ll come a time when you’re ready to sell. Now it’s time to get more help from an expert broker, your accountant and your lawyer.

When you are ready, you’ll:

6. Find a business broker for whom you will be neither their largest nor their smallest client. Warrillow suggests you make sure the broker knows your industry (because they’ll already know some potential buyers).

By writing an ambitious 3-year business plan that paints a picture of what is possible for your business, you’ll appeal to acquiring businesses who have the resources to accelerate growth.

7. Inform your team in plenty of time to positively prepare management presentations for meetings with prospective buyers.

After all your hard work building your business and your team over the years, it can be very difficult to tell your management team about your desire to sell. However, you may be pleasantly surprised when your team understand your goals and appreciate how an acquisition can mean significant career opportunities for them.

And when your team hear about the ‘success bonus’ from step 5, they’ll be even more engaged in supporting your sale of the business.

8. Converting your favoured offer to a binding deal can be both time-consuming and emotionally challenging.

Excitement at the offer, frustration at the due-diligence (60-90 days of sense-checking all elements of the business) and the challenge of negotiating up-front and earn-out amounts are often fraught.

Warrillow recommends calm, patience and determination to carry a deal through. He also suggests you treat any earn-out as ‘gravy’ – as long as you get what you want for the business up front, you can always walk if things get too complicated and difficult.

And think about how you will feel when you get an email like this from your bank: