When it comes to thinking over the steps that will lead to a successful sale of your company, John Warrillow has some sage advice.
Warrillow, the founder of the Sellability Score and author of the book Built to Sell, has devised an easy to follow process for selling any kind of business. He provided three steps every business owner considering a sale should take:
1. Create recurring revenue. If there is a single mantra that Warrillow comes back to, it's this alliterative phrase. Recurring revenue is predictable revenue that can be expected to continue in the future. "For your business to be able to operate without you, it helps to create some subscription-based, annuity-based recurring revenue so you're not relying on your personal salesmanship to sell your products and services," says Warrillow. There are different kinds of recurring revenue--some, like auto renewal subscriptions and hard contracts, are more valuable than others. But ensuring you have some form of it will help you glean a better sale price.
2. Find a strategic buyer. There are two kinds of buyers: financial buyers (who are buying your future profit streams) and strategic buyers (who are really buying your business to improve the performance of their business). Hands down, strategic buyers will offer you the highest possible value for your company. "Maybe they have a sales team who could fit your product into their bag nicely," says Warrillow. "Or geographic reach worldwide, whereas you've been focused on a very small market. Regardless, the strategic buyer is going to have things that they can monetize that the financial buyer won't."
3. Do your homework. There are a couple basic, preparatory things that any business seller should focus on. "When you leave the business," says Warrillow, "the business needs to continue on. That's the first thing to tackle: Create a company that can succeed without you. The business' management is also crucial. "Obviously, you're a huge inspiration for the company," says Warrillow. "You built it from scratch. But at some point you've got get other people involved so you can tell a buyer that there are other people running your company. They'll plan to stay even if you don't."
Follow these three steps and you'll improve your chances of getting the highest possible value for your company.