When I was a teacher, I learned how to write lesson plans by starting with the end in mind. The same principal applies to business owners! You should be thinking about exiting your business now to create the value you want when you’re ready to retire. How do you maximize the value of your business? There are three important things to pay attention to: Owner Dependency, Customer Concentration, and Structural Capital.
A business that revolves around the owner’s skills and contacts may be hard to sell. If you step away from the business will there still be a business for someone to buy? When you’re used to working non-stop to build “your baby”, it may be difficult to think letting go. First, build a strong team with clear roles to de-centralize yourself from the operations. Building a core team is one of the key elements of having a sustainable, profitable enterprise. Second, look to the leaders in your business for your succession team. Stepping back can be hard for a business owner whose grit and dedication built the business but think about testing the team’s independence by taking time away -Vacations!
Another area that drives business value is customer concentration. Do you have a few customers who provide all your revenue? If so, that can be risky to someone looking to buy your business. The same goes for customer relationships that are only tied to the owner. Will those customers commit to the new owner to make your business more saleable, consider connecting customers to your company’s brand, and not to you. What steps are you considering or currently engaging in to expand the customer base and share the customer relationship with the service the company provides as a team
The final area to review is processes, or structural capital. Is everything documented and clearly articulated, or does just one person hold the knowledge of the key things that get done? Mission statements, vision statements, clear strategies and standard operating procedures make it much easier for someone to buy and continue the business.
Maximizing the value of your business is like getting a house ready to sell. If you stage it correctly and there are no repairs needed, you’ll get a better price. It will be turn-key! If your business is a “fixer upper” it won’t sell for top dollar. Taking the time to work on your business now to make sure it’s less dependent on you as the owner, has appropriate customer concentration and relationships and well documented books and processes will help make your transition to retirement, or your next step, smooth and, perhaps, more valuable.
Do you need more information? Call Affinity Wealth Advisory Group at (602) 923-9800 to schedule your complimentary initial consultation.
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