This pays off even if you never sell

There’s a huge, hidden bonus to getting your company ready for a sale.

The best part about getting your business ready for an acquisition…

Is that almost all of the things you would do to maximize your sale price… are the SAME things you would do to create a business that’s great for you to run.

I like to call this the Double-WIN rule.

It puts a totally new spin on exit planning, because you don’t have to wait until you sell to see the ROI. 

The work you put in to make your business more sellable LATER – can also help you right now.

So here’s a little story.

I once talked with a founder who wanted to sell her business. But she knew she could make some improvements that would make the company more appealing to buyers and sell for more money.

So she spent some time on those things. In particular, she did two things:

First, she grew her team and delegated more of the responsibilities that had been on her plate as a founder. Her goal was to reduce founder dependency, so a buyer wouldn’t see her involvement as a risk, and there would be a clear path for her to completely exit the business.

Then, the second thing she did was increase her profit. She did this partly by increasing revenue, and then at the same time, she reduced her expenses. 

She eliminated a bunch of tools they didn’t really need, and she also let go of a couple of underperforming members of her team. 

Honestly, they were probably people who needed to go for a long time, and this project of trimming the fat was just the kick in the butt she needed to make those hard choices.

She wanted to increase profit because she knew that could drastically increase her sale price. 

If you think of this through the lens of a sales multiple, say your type of business is expected to fetch 3 times profit when you sell… If you’re able to increase your profit by $100,000, then you might be able to add 3 times that to your sale price. When you sell, that $100,000 becomes $300,000.

So that was this founder’s goal. But something interesting happened after she did this work to increase her profit and reduce the company’s dependency on her.

She came back to me and said, I don’t know if I want to sell this business anymore. 

I’m making more money because I increased the profit, and I’m spending LESS time working because of how I delegated my responsibilities – so I generally am feeling less stressed and enjoying the work more.

Spoiler alert – she did eventually go on to sell the business. 

But the lesson here was clear: when you take steps to improve your business for buyers, you’re also improving that business for yourself for as long as you continue to run it.

Founder dependency and profit margin are good examples here, but this could also apply to getting all your contracts in order, or making sure your financials are in great shape, or diversifying your client base. 

Nailing these best practices are going to make your business more fun to run – AND, if you end up selling it one day, you’ll increase your chances of getting a deal you’re really happy with.

Now, there is one outlier to this. And that outlier, is growth.

Your growth trajectory will heavily affect your sale multiple. And actually, this is a mistake we see founders make all the time: waiting to sell until the business has plateaued.

You actually want to sell while you’re still growing. This can feel counterintuitive, because many founders want to ride a growth wave as long as they can.

But buyers will pay more for a company with a strong growth curve, specifically they want to see your profit increasing year after year.

BUT. Here’s the interesting part.

If you’re continuing to *run* your business, growth might be important to you, or it might not. 

You can have flat growth for years and still run a fantastic business, so long as it’s cash-flowing.

In fact, many founders prefer a consistent business with slow growth or even no growth, because that’s predictable revenue without the stress of growing pains.

If this is you, congrats! We don’t spend enough time celebrating consistent, reliable businesses — because Silicon Valley has glorified growth at all costs. But if you’re running one of these consistent businesses, you know just how great it can be.

Now, buyers will certainly be interested in a business that’s consistent. But they will likely pay MORE for a business that’s growing – which is why, in my mind, this is the exception to the Double-Win Rule. 

OK, now that you understand the Double-Win Rule… we can all reframe exit planning from being this future-focused activity into something that also improves your business right now.

You can build to sell, at the same time as you’re building for what you need, today.

Thanks for joining us, and we’ll see you next time.