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Build It to Sell It

by Karen Jackson  | 7 Comments

Build your company to sell it. Seriously. Build it so that it’s worth more than your competition, so that suitors are lining up, so that you can sell at an enviable multiple and never work again. Now that I have your attention, which group of CEO’s are you in?

You likely fall into one of two camps: the pyched, that says, “Awesome, sign me up!” or the affronted. Their reaction is, “That’s disgusting, money grabbing, not why I’m in it. Besides, I love to work and don’t ever want to stop.” It’s the second group that I hope will hang in with me for a couple of moments. “Build it to sell it” could be the best strategy decision you’ll ever make.

Companies that are “built to sell” share common attributes: sticky & diverse customers, defensible future growth strategies, high gross profits, dependable revenue engine, solid management teams and highly functional cultures, scalable systems and processes, audited (or minimally, reviewed) financials and buttoned-down contracts and employment agreements. Imagine for a moment that you built your company with these attributes as absolute priorities. That from day one, you carefully picked the right target markets, charged fairly for the value you create, attracted and nurtured the best team, implemented a platform to support it all, used a great accountant who kept your books clean and helped you steer, and created clear contracts instead of verbal (often misunderstood and rarely enforceable) agreements.

If the image conjured is lowering your blood pressure and bringing a sense of peace, I hope you’ll consider this advice. Because here’s the real secret, the reason to build so deliberately: When you build a business to sell it, you create a spectacular company – one that is highly functioning, always creating, capable of dealing with missteps, attracting and retaining customers and employees alike. You don’t ever have to sell it. You just get to enjoy it. You even get to take vacations from it without the whole darn thing falling apart in your absence. (Here’s a good test for how close you are: take a vacation for 2 weeks without checking in and see how well the business functions wthout you.) It’s not really about the money – though that’s a fine reward for your effort – it’s about running a company that hums, that makes you proud, that sustains you and your team emotionally and financially. Life is way too short to do it the other way. Sadly, most small business owners do.

And, everyone knows, things change. Today, you believe you’ll want to own it forever, but a fork in life’s road introduces a new opportunity or an unexpected health crisis. Equally possible, you wake up one day and realize you just don’t love it any longer, that you’ve lost your passion. (That’s what happened to me; call if you need someone to tell you it’s ok to get out.) If you “build it to sell it” you actually can. Quickly. For the best possible multiple the market is offering. To a company that will be rewarding for your employees to join. There’s nothing treasonous about that. It’s just plain smart.

 

| Categories: Business Planning, Exit Strategy, Growth, Sales, Selling a Business
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7 Comments to Build It to Sell It

  1. Janice Fudyma
    April 11, 2012 12:50 pm

    Excellent article and so true.

  2. Marty Aronow
    April 11, 2012 2:14 pm

    Good job. Couldn’t have said it any better myself.
    With Boomers starting to consider selling their businesses, they’re realizing that keeping a business “small” and owner dependent has reduced the value of their business to the point that they can’t afford to sell.
    Your artilce supports the idea of your exit plan should be started on day one of your new business.
    It’s never to late to plan.
    Marty

    • Karen Jackson
      April 11, 2012 4:54 pm

      Thanks for weighing in Marty. Excellent point about owner dependent businesses. If the asset is the owner, and not the entity, it is a very tough sell. Assuming one could sell the business, there is either little cash in the deal or the individual must stay on with the new ownership for an extended period. Neither scenario is positive.

  3. Ed Glassmeyer
    April 12, 2012 12:35 pm

    I agree it’s important to have an objective or guiding principle for building your business and keeping it on track…vs picking a life style choice or getting even with your former boss.
    Building a company to go public is what I recommend. Getting into good habits right away….setting goals/expectations that you expect to meet, and doing so. As you grow, delivering ascending quarterly growth in revenue and profits. Creating dash boards that allow you to track and anticipate events (running short on cash? are you on plan for bookings this month?). Building to sell is similar….but the stakes are higher, both managing risk and creating value, going public, so it will increase your blood pressure and focus on the business.

    • Karen Jackson
      April 13, 2012 10:16 am

      Thanksf or weighing in Ed – spoken like a true VC! 🙂 But you’re absolutely correct, whether to sell or take public, it’s essential to build for the eventuality from the beginning. The very act of establishing best practices positions a company for growth and puts a CEO in a position to choose their exit strategy.

  4. Gina Fedeli
    April 12, 2012 2:46 pm

    Hi Karen,

    So well said. A CEO may decide not to sell their company however wouldn’t it be great to have the choice? In the interim, there is the added benefit that the organization runs well, process is streamlined and people are accountable so the CEO can think of ways to grow the company or take on new initiatives.

    Sounds like a win-win!
    Gina Fedeli

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