Article by: MaryEllen | Tuesday, July 3, 2018

By MaryEllen Tribby

Owning a business is much like owning a boat. The joke is that the best two days of a boat owner’s life are the day you buy a boat and the day you sell it. Whether that’s your goal or not, whether you think this might be your eventual goal, it’s still important to know.

The tasks you need to position your business for sale are the same tasks you need to create for a successful business in the first place so you can enjoy your life and freedom.

There are really two types of buyers of any business. First are investors that include venture capital firms, mergers and acquisition firms, private equity groups, and high net worth individual investors.

These are the types of people who will buy your company even if they don’t know much about it. That’s because they want to flip it to somebody else for more money, or they just want it for passive income.

The second type of buyer is a strategic buyer who might be a direct or indirect competitor. They may be somebody in a similar market but they really want to get into yours. They may already be doing something similar and want to expand or grow by acquiring other businesses.

You might be thinking that the best deal will be to sell your business to others who are in business with you, but in reality, the bigger money usually happens when you sell to that first group, the investor group. But the only way that will happen is if your business is structured well.

Strategic deals can happen between rivals, but strategic buyers will rarely be able to pay you the type of money that an investor can. If you deliberately position your company for investors, you will have a head start on the process when the time comes to sell.

Getting Ready

The first way to maximize your sale is to increase your EBITDA, which is an acronym that stands for Earnings Before Interest Taxes Depreciation Amortization. It’s a fancy accountant phrase that basically means your net income. How much money did you actually make? How much money fell to the bottom line after accounting for every expense including your salary?

When you’re selling your business, your business value will be some multiple of that EBITDA number. If you’re using QuickBooks or a bookkeeper, you should be able to calculate this number quickly and easily. The more money you make, the more money you can sell your company for.

Another factor that determines the value of your business is the intangible – the systems that you have in place, which are your standard operating procedures (SOPs). If you wake up every morning and you don’t know what you’re going to do today, you might have a good lifestyle business, but that is not a system, and nobody will be able to buy that.

You need to follow a number of standard operating procedures, everything from hiring employees to generating reports. These must be repeatable tasks that you need to follow for the business to produce revenue. Those are all systems.

Start McDonaldizing Today

2016-07-04-pixabay-mcdonalds-1340199_640The way that you grow your business or start up a new one is all about systems. Anybody who wants to buy your business will want to see how good your systems work. I like to call this “McDonaldizing” your business. When McDonald’s trains new employees, they do so with SOPs in place. Every time McDonald’s makes a Big Mac, they do it the exact same way. That same structure needs to go into your business.

If you have an email system that consistently gets people to sign up and attend a webinar, and then predictably converts attendees into buying products, that’s a standard operating procedure that investors want to see.

So begin systemizing all your processes. Not only will this make you a more successful business owner, but it’ll make you a more attractive purchase opportunity.

Another factor that makes your business more appealing is if it generates predictable, repeatable income. Nobody is going to buy a company that did a million dollars one month and then goes another six months before it makes any more money. That’s not predictable, repeatable income.

If you’ve got a successful inbox magazine, perhaps you have regular advertisers who may book space in your inbox magazine or website out for six months to a year in advance. That’s good and that’s what investors want to see. That’s predictable, repeatable income.

If you convert free subscribers to paid subscribers within 30 days with proven tactics, again that’s what investors are looking for. Or if you’ve got a continuity business, such as a membership or a subscription business that shows predictable repeatable income month after month after month, that’s a concrete business. At that point, an investor knows that all they need to do is to continue doing what you’ve been doing, and they should see the same results with the same kind of money coming in.

Events are also attractive to investors. If you can attract a large number of people to events time after time, investors see this as both a repeatable and predictive revenue stream. The best part is that they can be an online event like a webinar, or an offline event such as a conference or summit. As long as you can show that you make predictable, repeatable income, investors will see how they can make the same predictable, repeatable income.

Just remember, having systems in place and having a predictable and repeatable income is what makes your business valuable and attractive to others. It’s not about launches or promotions. It’s about knowing how to make money month after month, year after year, so put those systems in place now, that is what will help your EBITDA grow.


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