What are your business goals for the year? If you're like most owners, you have a profit goal you want to hit. You may also have a top-line revenue number that's important to you. While those goals are essential, another objective may have an even bigger payoff: building a sellable business.
But what if you don't want to sell? That's irrelevant. Here are five reasons why building a sellable business should be your most important goal, regardless of when or if you plan to push the eject button:
1. Sellability means freedom
One of the fundamental tenants of sellability is how well your company would perform if you could not work for a while. As long as your business is dependent on you personally, there's not much to sell. Making your company less dependent on you by building a management team and creating just-add-water systems for employees to follow means you can spend time away from your business. Think of the world of possibilities that would open up if you could choose not to go into the office tomorrow.
2. Sellable businesses are more fun
Running a business would be fun if you spent your days on strategic thinking and big picture ideas. Instead, most business owners spend the majority of their day on the minutia: the government forms, the employee performance reviews, bank reconciliations, customer issues, auditing expenses. The boring details of company ownership suck the enjoyment out of owning a business—and it is precisely these tasks you need to get into someone else's job description if you're ever going to sell.
3. Sellability is financial freedom
Each month you open your brokerage statement to see how your portfolio is doing. Not because you want to sell your portfolio, but because you want to know where you stand on the journey to financial freedom. Creating a sellable business also allows you peace of mind, knowing that you're building something that—just like your stock portfolio—has a value you could choose to make liquid one day.
4. Sellability is a gift
Imagine that your first-born graduates from college, and as a gift, you give him your prized 1967 Shelby Ford Mustang. Your heavily indebted child takes it on the road, but after a few miles, the engine starts smoking. The mechanic takes one look under the hood and declares that the engine needs a rebuild.
You thought you were giving your child an incredible asset, but instead, it's an expensive liability he can't afford to keep, and nor can he sell it without feeling guilty.
You may be planning to pass your business on to your kids or let your young managers buy into your company over time. These are both admirable exit options, but if your business is too dependent on you, and it is not build to run without you, you may be passing along a jalopy.
5. Nine women can't make a baby in one month
Warren Buffett famously quipped, "You can't produce a baby in one month by getting nine women pregnant." His point is some things in life take time, no matter how much you want to rush them. Making your business sellable often requires significant changes. A prospective buyer will want to see how your business has performed for the three years after making the necessary changes to make your business sellable. Therefore, if you're going to sell in five years, you need to start making your business marketable now, so the changes have time to gestate.
Are you curious about how sellable your company is and what you would need to tweak to sell it when you're ready? Then it's time to get your Value Builder Score. It takes about fifteen minutes, and your responses are always kept confidential.