Every entrepreneur's dream is to sell their company.
We all read stories of the huge exits and insane money.
Starting a company, becoming profitable, and then eventually building it into a machine that makes more money than it spends each month for years on end is the dream.
But how do you do it? How do you build a company that somebody else wants to own?
It takes the right strategy, people, process, systems and more.
The issue is that most small business owners never build an asset they can sell. They build a job.
Every problem and key decision still comes to them. They work 60 hours a week. They deal with stressful situations every day. They can't go on vacation. They struggle to find good employees.
And they make a hundred or a couple hundred thousand dollars a year for as long as they can handle it.
But if they stepped away, the business would collapse.
Don’t get me wrong - I know many people who have become wealthy through this path.
They start something, grind for a few years, get to several hundred thousand or even 7 figures in annual revenue with a small team and they earn good income.
But they can never step away.
They answer work calls on the golf course. They are constantly tired and overwhelmed because they know that if they stop working, they will stop getting paid and their business will begin to fall apart.
The problem is that their companies rely far too much on the owner to be interesting to a potential acquirer so they can never sell.
Two months ago, my business brokerage sold a plumbing / electrical business for 7 figures.
The owner built the business over 20 years and had a life-changing exit at the end of the journey.
What did the company have that made somebody willing to pay 7 figures to buy?
- A steady flow of leads
- A sales system that didn't rely on the owner
- A few folks on management team who could solve problems
- A few tenured crews / technicians executing the work
Lets dive into this framework to figure out the pieces of the puzzle you need if you want to sell your company.
Step 1: Figure out how to repeatedly generate high quality leads:
First things first, new leads are the lifeblood of any business. If you can't consistently generate high quality leads without being personally involved, you’re in trouble.
Potential buyers want predictability. They want to see a system that delivers new traffic and leads month after month, whether you're there or not.
So a mature business that’s ready to sell will have:
- A marketing process that’s well documented that anyone can understand
- Multiple lead sources (i.e you are not reliant on just one channel)
- Clear metrics on cost per lead, conversion rates, CAC, and return on ad spend
- Systems that can be handed off to someone else in the event of a sale
It doesn’t matter if you get your leads from SEO, paid ads, content marketing, cold outbound or all of the above.
What matters is that there is a system that’s measurable and repeatable that a new owner could continue if they buy your firm.
In the case of the plumbing company, they had the highest reviews in the area and showed up on Google. They also got a lot of referral business each month.
It was reliable and the buyer could count on the leads continuing to flow.
Step 2: Build a sales and service system that doesn't require your time:
Once you have the leads, the next thing you need is a process to consistently close and service them (without you, as the owner being directly involved)
Here's where I think most owners make their biggest mistake. They become the bottleneck in their own business because they want to stay involved in every detail.
They want to be on the sales and onboarding calls. They want to send the contracts over to a client. They want to do customer service when things go wrong.
And yes, the owner should step in occasionally when needed, but 80+% of the time, this work should be delegated and it should be someone else’s job.
When it comes to closing and delivery, you also need documented processes for everything.
You should know:
- How your leads get qualified
- Your sales script/structure than any rep can follow
- Your service delivery checklist and procedures any new employee can replicate
- Your customer onboarding process
- And a playbook for how you do customer service when things go wrong
The main question here is, knowing what you know now about your business, could you hire someone tomorrow and within 2 weeks of training, have them deliver the same quality of service that your customers expect?
If not, there is still more that you can do to improve.
Step 3: Build a team that can make money without you:
I feel like I might be getting repetitive here but as you can tell, this all comes back to building and managing teams. If your business can't operate without you, it's not worth much to anyone else.
If you, the owner, are too involved in operations, an acquirer sees that as a huge risk. What happens when you step away? This needs to occur across all core functions of the business. You need people and systems for marketing, sales, delivery, finance, accounting, HR etc.
Obviously getting to a place where you aren’t as involved takes a lot of time. It doesn’t happen overnight but if you eventually want to sell, your 5 year goal as a founder should be to slowly but systematically remove yourself from day-to-day operations.
In the case of the plumbing company, the owner had a right-hand man. Somebody who had been working with him for 10+ years, was well compensated, and understood the business.
This person stayed along during the transaction. Without him, this business wouldn't have been nearly as valuable.
They also had a few crews of service techs who were reliable, tenured, and solid at their jobs.
The vacation test:
One of the best ways to know if you have truly built a well functioning machine is to take a three week of vacation.
If everything runs smoothly, you're ready to sell. If not, you still have work to do.
Get a valuation / assessment:
My team and I recently helped this company sell for 7 figures.
If you'd like to have a discussion about what your business might be worth, you should book a call with us.
Not a sales call. No obligation. Just get our thoughts on your company.
We can help you think about valuation, who might make the ideal buyer, what steps you could take to add even more value, and what the market might look like if you were to sell now or in the future.
The big picture:
Think like a buyer.
What would you want in a business if you were about to buy it?
You'd want reliable leads coming in the door. A sales person or team who can close them. Employees who can do the work. And somebody on the management team who can hire, fire, delegate and solve problems.
You'd want a business that can make money without your energy 70 hours a week. You'd want to be able to come in and work ON the business instead of IN the business.
Is your business easy to own or hard to own?
The harder it is to own and the more it requires of you, the less valuable it is.
The more things you have to do after purchase to make a business sustainable the less money you are going to be willing to pay.
Your business should be no different if you are looking to sell.
Good luck!!
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A few tweets from this week:
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Thanks for reading.
Onward and upward,
Nick Huber
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