This week a client contacted me to say “someone called and they want to buy the business”, then, when we spoke, they reminded me that I had told them this would happen in due time. What a moment, am always grateful when this happens!
Build as if for sale
Over the years I have always encouraged business owners and leaders to “build as if for sale”, whether or not they have any intention of selling the business in the future. To do this involves discipline, but is made simple by using as a guidepost for business growth decision-making “what would a potential buyer think of this?”. As one simple example, the more the business depends on the owner or other key people, the less valuable the business is. This often seems counter-intuitive to owners (particularly founders or members of family businesses!) but is a hard and fast truth.
Capability Matrix
One tool I have often used is a framework called a “Capability Matrix”. Within an hour or so i can sit with a business and “score” them from 0-100 on their business capability by a) explaining some core business concepts in a few minutes, then b) asking them to score themselves, then c) adding up the score. Here is how this goes:
- Typically businesses at the start of the “build as if for sale” journey score under 20 out of 100. This is normal.
- What I will then say to them is “as you get your score up higher and higher, the outcome of this will be a more effective, profitable and fast-growing business”.
- I then tell them: “once your score gets over 60, word will start to get around about how your business runs so well and so smoothly. Once you get up to 80, the phone will start to ring with people wanting to buy your business.”.
- Oh, and I tell them that by the time the phone rings with people interested in buying them, the valuation of the business will be several times what it was when the score was below 20 at the start.
Life changing money
Again and again, I have seen this play out. Each time I am grateful at the privilege I have had to support business owners on the journey. For those who own their own business (or lead a family business), this moment on the journey can involve “life-changing money”. It is truly wonderful to play a small part alongside them as they put in years of work to get to this point, then to continue alongside them as they enter the discussion on “we would like to buy your business”.
My message to you today is that this can be done for many businesses, it is simply a matter of a) being ready, b) asking for help with the process, and then c) maintaining your focus and discipline over time to carry through the execution of your strategy. As I noted in “Think in Ink” (which also features the “Valuation Model” shown above, the first step is designing and writing down a strategy.