At some point you are probably going to sell your business. There is no shame in it, we are too. Whether we acknowledge it openly or not the smartest people in the room see owning their own business as a vehicle to create wealth, so that we can have the lifestyle we want both now and when we are finished working.
The vast majority of business owners however see their business (wrongly I might add) as a way of owning their own job- simply content to get by. They invariably coast by their entire business life and then when they feel like retiring sell their business and leave lots of money on the table.
Most business owners sell up for some variation of their gross profits, what is on their balance sheet and some good will. Far less than what their business is actually worth to the buyer.
Most of us have an ‘Enough is Enough Number.’ We know once we have so many dollars that we are set for life and can stop working. Some of us plan on keeping on working past that but the vast majority of us are in business to fast track the accumulation of enough wealth so that we can do something like sit on the beach and drink margaritas.
And being paid multiples of earnings for your business makes that dream of reaching our ‘Enough is Enough Number’ and sitting on the beach that much easier.
When you are looking to sell, the sustainability of your business is important to any business buyer. That is how predictable is the business’s revenue month-on-month or year-on-year?
A strong relationship with your customers increases the predictability of your revenue it also increases the amount of revenue and also profits. Having defined relationship building systems means that there is less risk in the variability of future revenue.
These systems mean that your business can be sold for multiples of its annual income or book value simply because you can prove the predictability of the revenue – the buyer is no longer buying a business. They are buying systems that produce an annual income – effectively an unfranchised franchise.
All of this needs to be thought about long before you ever think about taking your ‘chips off the table.’ The late Steven Covey first habit of highly effective people was ‘begin with the end in mind.’ So the sooner you structure your business in way that you can make desirable to a buyer the longer the track record you have to prove that your systems work and also it means that you have far less headaches to deal with in the mean time.
In fact if you have retention and relationship building systems in place you’ll have much higher profits that you can use for all sorts of other things like getting even more customers. So that you can sell your business for even more when the time comes.