Growing to sell is something many entrepreneurs do. The business pages are full of stories where entrepreneurs have grown (or streamlined, in the case of private equity firms) a business as a ‘project’, then made a healthy profit upon selling the venture on.
Easier said than done. Nevertheless, take the following steps and you can give yourself every chance of growing a thriving business and ultimately selling up for a healthy return somewhere down the line:
1. The bottom line
Success in business is measured in many ways but above all – well above all – business buyers value profitability. So if you are planning on growing to sell, you want to boost your business’s appeal then you must establish robust revenue streams and nurture strong, sustainable growth.
Profitability isn’t just about revenues of course; also work to streamline costs where possible through, for instance, automation or by selling unproductive assets.
2. Understanding your sector
Both growing to sell your business and making it an appealing asset to buyers is easier if you understand what’s going on in your sector. Take time to research the prevailing and emerging trends in your industry, the fastest growing companies and the reasons for their success as well as the struggling brands and the factors behind their failures.
3. Relationships with customers and suppliers
Competent customer care is essential to forging a strong reputation, to keeping customers and attracting new ones – especially in the social media age where word of mouth travels at breakneck speed.
It’s also critical in making your business a saleable asset. A prospective buyer need only trawl Twitter, Google News or TripAdvisor for evidence of unhappy customers – after all, people are much more likely to report a bad than a good experience.
Uneasy relations with suppliers are less easy for buyers to discover, although a strategic buyer from the same sector may, for good or ill, already be aware of your reputation in the supply chain.
It’s also a risk to your ongoing success and off-putting to buyers if one or two customers account for a huge chunk of your business – lest they suddenly decamp to a rival. Consider, then, rebalancing resources away from seeking bigger purchases from existing customers and towards securing new customers.
4. Separating yourself from the business
The hardest business of all to sell – nigh on impossible even – is one that relies heavily on its owner. Do relationships with suppliers hinge on the rapport you have personally with them rather than your prices or standard of service? Do customers use your services because of your skills or charisma as an individual?
Is it your personal attributes and decisions rather than the business’s inherent strengths that underpin the business’s success?
If the answers to any of these questions is ‘yes’ then it’s time to make the business the star attraction rather than yourself. This might mean recruiting experienced managers with talents that compare favourably to your own or training existing staff in aspects of your role. It might also mean focusing on nurturing your company’s reputation as opposed to your personal brand.
5. Systems and processes
Whatever your end product, growth will be more sustainable – and scalable – if the processes that create that end product are transparent, documented, easy to understand and follow and easy to refine or adapt over time.
An incoming owner will also be reassured that they, and anyone they hire, can quickly get to grips with the business and their new role.
Your corporate and financial records should exemplify the same attention to detail. And if you intend to exit on schedule your books must be flawless and clearly trace your success.
6. Exit strategy
Though much of the above is just good business practice, such measures will also further your goal of finding a willing buyer and concluding negotiations at a favourable price.
Whether you want to sell in five, 10 or 15 years’ time, it’s important to have your exit strategy in mind every time you take major business decisions.
Likewise, your ongoing business dealings represent an opportunity to build good relationships with key players in your industry who may turn out to be potential buyers.
Sign up to our newsletter to get the latest from Business Advice.