Nothing good lasts forever, but often we think our business will. Recently, I compared young entrepreneurship in 2018 to a wave. The curve of the wave that a lot of us find ourselves at is getting to a place with our business where we might be looking to sell or exit it.
However, there are many misconceptions around this topic when people start considering it. From the young entrepreneurs I have talked with, the most common one is they view selling their business as giving up or failing. Both of these options are a “no-no” in the young entrepreneur circles where no one gives up and the last thing you’d want to admit to failure.
“We don’t give up! We hustle! We make things happen and we do not quit!”
But like I said at the beginning, every good thing comes to an end. So, if our business is eventually going to come to an end, even if that end is just the closing of our personal involvement, shouldn’t we start with that end in mind? Today we are covering the topic of building a business you can sell by pulling from the experiences of some of the guests I’ve interviewed on The Entrepreneur Before 25 Podcast.
Begin with the end in mind
Most of us want to find “our life’s work” as soon as possible. Our greatest desire is to discover the thing or business that so closely aligns with our passion that we’ll want to stick with it or some form of it till we retire. However, that’s not realistic and therefore not accurate. Even if you did stick with your business the majority of your life, at some point, you’re going to want/have to exit it. Whether you’re 30 or 60 at that point, it doesn’t matter. Start wrapping and preparing your mind around this now.
Multiple EB25 guests have often explained to me that the reason this is so hard is we can get so emotionally attached to our business that the thought of our time ending in it is an emotional one. It’s almost like our business has become who we are and part of our identity. No wonder it’s hard for us to let it go and move on!
So how can we combat the above points? In an ideal world, when you start your business, you should set a goal on when you want to exit/sell it. Even if you are planning to stick with it for years and years, eventually there will come an end point. In everything you do in your business, you want it to be feeding the eventual success of that big end goal.
The thread of “beginning with the end in mind” will go throughout this article as we talk about the framework of what this actually looks like.
Focus on structure
If we are truly beginning with the end in mind in our business, then that’s how we need to operate every aspect, from start to finish. Especially when it comes to how we structure things.
I recently had the honor of having Jessica Fialkovich, Co-Founder of Transworld Business Advisors on EB25. Jessica is an expert at helping business owners successfully exit their business between 3 to 5 years of starting it. During our interview, Jessica brought up many amazing points. One that stood out to me the most was her saying that from the beginning, you should be structuring your business so that eventually it operates without you. This is essential to do so that when buyers look at the health of what you’ve created, they see that it is self-running and self sufficient. This indicates that you have solid systems in place. As we will go over later, well oiled systems play a big role when analyzing the value of your business.
Make every time/money based investment with the motive of making your business as attractive as possible to sellers. In addition to this, don’t pour back all your profits into the business unless you’re specifically in a phase of trying to grow it. If you pour all your money back into your business, then it could show up badly on your Profit and Loss Statements (P&L’s) which is a large aspect of what buyers base their purchase decision on.
When focusing on structure within your business, organize it to be self-running/sustaining, replace yourself as soon as possible and invest back in your company only in the areas that will grow it.
From signing your lease to building your org chart, always ask yourself, “how does this contribute to my end goal of eventually selling this business?
Don’t undervalue what you have created
Have you ever thought to yourself, “well if I want to sell this, than why would someone want to buy it?”
This is a common belief among business owners. If you want out, why would someone else even consider wanting in. However, this train of thought isn’t accurate at all. For almost every business, there are people out there who are the perfect candidate and demographic to look at buying it.
Jeet Banerjee is 25-years-old and has already successfully sold two businesses. In his episode on EB25, we talk in depth about what that process looked like. He had built a solid asset and wasn’t even looking to sell it. Then a buyer came along, saw the value of what he had created because of the good systems he had in place, and before he knew it, he took their offer and sold his company.
Contrary to what a lot of people think, your business’s value isn’t just based off of what you see on your P&L statements. This could be a relief to a lot of you. Your business’s value is based off of a lot of things and although your P&L’s play a big role, there’s more involved. Intellectual property such as systems you have in place in your business, hard assets you have within your business, customer base, your brand and your reputation all play a role in the value of your business. The goal is to get all those aspects of your business to be as healthy as possible.
Who knows, you could end up like Jeet who built his businesses so well, that a buyer came without him even searching for an exit because of the value his business created.
I’ll leave you with this one short story that I shared on my most recent solo episode on EB25: A few months ago, I was at a family office event talking with a billionaire. During our chat, I had a lightbulb moment. This lady didn’t get to where she is today by limiting her potential to one business. She got to the level of impact that she’s making by jumping levels as fast as possible, pushing herself to grow everyday and most of all, not being so attached to one thing that she wasn’t willing to let go of the good for the best that was to come.
The main point I want to get across to you is don’t be so absorbed in one business that you forget to look up and see what else is out there. You aren’t a failure or giving up if you choose to exit your business. Build your business with the end in mind so that you can eventually successfully sell it. Remember, letting go of the good for the best is always worth it!