What does a small-business owner need to do to get ready to sell the business? In my experience, the first thing is to start planning early – at least three to five years before you’re ready to sell. Next, understand that you’re really selling several things that a buyer wants:
• A loyal customer-base
• A current AND future revenue stream
• Your products and services, in whatever form they are delivered
Recently, I was the guest on an EXITREADINESS® podcast with host Pat Ennis, Founder and President of ENNIS Legacy Partners and a certified Exit Planner. We got into the details of some “get ready” points and how they relate to sales. Here are my takeaways for the 5 things to do to get ready to sell your small business.
1. Get Ready by Getting Yourself Out of the Operational Side
Your business won’t be viable in the future if you are the one primarily responsible for driving customers and revenue. If it’s through your own relationships and business development efforts, how would that continue? As much as you may (and probably do) love this part of the business, you will need to find a way to step out of that role.
Then you have to figure out how to guarantee the pipeline without you. That’s a really difficult thing for most small businesses to accomplish. But it’s critical that you get your company to a point where it’s truly self-sustaining.
Sometimes buyers want owners to stay involved one or two years after the sale. Whether you have an earn-out agreement or not, you will need to put systems and processes in place to show that the business can go on without you.
2. Put the Right Sales Team and Leadership in Place
In data compiled by Sales Xceleration from 2,355 completed survey questionnaires through 2020, 73 percent of small to mid-size businesses rated themselves “poorly” in managing their sales teams properly and effectively.
To me, the best answer to this is putting great sales leadership in place. When hiring, don’t go on gut alone – everyone’s default is to hire someone like them (see “poor management” above). Use a third-party assessment tool or hire an independent recruiter to screen leadership candidates for you. Here are some steps for how to hire a stellar sales team.
Sales leadership is key to your exit strategy. That illustrates to buyers just how well your business runs without you and will continue to drive revenue.
3. Make Sure You Have Efficient Sales Practices
My friend Fred Diamond at the Institute for Excellence in Sales (IES) has interviewed more than 200 sales leaders over the past three years. When asked, leaders said that hiring, motivating, and retaining salespeople is the hardest part of their day-to-day responsibilities.
To be able to show future buyers a retention strategy, put management processes in place now. Clarify goals, expectations, and compensation for your sales team. Customer relationship management software and processes will add value to your sales team as well as help your business maintain (and grow) a strong pipeline.
Also, make sure that your sales projections match current reality. Your buyer will expect that whatever claims you make about future revenue can be relied on. So, pay attention to effectiveness metrics – lead quality, close ratios, and win-rate on proposals.
4. Do Your Own Due Diligence to Get Ready to Sell
Similar to a person buying a business, you should perform your own sales due diligence. Look at your business with an objective point of view and examine the following:
- growth and year-over-year profit
- stability of customer base
- processes for identifying and on-boarding new customers
- revenue and sales pipeline
- leadership strengths and weaknesses
- employee retention, satisfaction, and ability to act independently
Your goal is to make your business “buyable” by accelerating growth and making it self-managing. Then it will be living up to its potential. To understand more, read the new book Buyable by my friend, Pinnacle Leadership Guide Steve Preda.
5. Start Early and Engage a Certified Exit-Planning Professional
As I mentioned at the beginning, start planning your exit strategy early – at least three to five years in advance. That gives you time to improve your company’s strengths and shore-up its weaknesses.
Importantly, you also need to decide what you want out of the sale of your company – both personally and professionally.
To maximize this potentially once-in-a-lifetime opportunity, the best advice I can give you is to engage a certified exit-planning advisor (CEPA). My company can help you put the right infrastructure and leadership in place. We will create a high-impact sales culture to maximize your revenue and free you up to focus on other activities, as you ready your business to sell.
Does your sales leadership need help setting goals? Does your sales process or team need overhauling to reach company goals? If so, give me a call and I can help.