When you started your online business, your goals were to grow it as quickly as possible and turn high profit margins.
As your business begins to evolve and moves away from the startup period, your goals may still be focused on growing it, claiming more market share, and keeping your customers happy. However, when you hit those goals, what do you do next?
Many online entrepreneurs decide to start a business and plan to hold onto it forever, passing it down to the next generation. For some entrepreneurs, though, their goals are to build the business to a point where they can sell it to another investor.
If you’re one of the entrepreneurs building your business with the intentions of selling it one day, you should start planning for that day now.
Putting in the work as far as two years ahead of your planned exit date can help you during the sales and negotiation process.
Building your business around making an exit one day can help you ensure you’re getting the highest valuation possible, and are structuring the business in a way that makes it far more attractive to investors you want to sell it to.
1. Don’t Lose Focus On The Future
One of the biggest mistakes an online entrepreneur can make when they want to eventually sell their business is becoming short-sighted and losing focus on the future.
You’re making a grave mistake if you stop planning for the eventual sale or stop thinking about how the business can be grown once you do sell it. Your investors are going to lose interest in the business if there isn’t any growth potential left in it.
They want to buy a business that can be easily taken over and can capitalize on the foundation that you’ve already put into place.
That means, to sell your business for a high valuation, you need to put a lot of thought into your plans before, during and after the sale. Your investors need to be able to scale what you’ve created so that they can get a faster return on their investment.
2. Consider How You Invest
Stop and think about what happens when you decide to sell your house. What are the areas you’re going to spend time and money on?
For most people, fixing broken things that decreased the house’s value would be the most important to address. In this instance, replacing a roof or repairing the AC unit would be important. Would you go as far as installing a brand-new pool, though?
Your business operates the same way.
Instead of going big and converting to solar energy, remodeling your bathroom and kitchen, or installing a new pool, focus on the small things that are going to make the biggest impact.
While most of these enhancements would increase the value of your house, they’re going to be a wasteful way to spend money and are unlikely to give you the return on your investment that you are expecting.
Whenever you’re preparing your business for sale, think about the investments that you’re going to be making in the same way. Ask yourself if the money you’re spending is necessary for making the business more attractive to your investors.
If it’s not likely that the investment will add value to the business, skip it. This is especially true if you have to incur debt to make the investment.
3. Sell When The Time Is Right
Even though you want to think ahead to when you can actually sell your business, you also want to make sure you’re not holding off too long because of what might happen in the future.
Most online entrepreneurs make the mistake of delaying the sale when they’re experiencing a growth trend and try to push for the exit when the business is declining.
Unfortunately, what this typically causes is a reduced valuation or a harder sale because investors aren’t going to want to take over the business during a downturn.
When you’re trying to get the highest sale price possible, you need to cut cloth when the business is experiencing a growth trend and work on increasing the sales again if the business has recently started going through a downward trend.
As hard as it may be to let your business go when business is good, investors will appreciate it. Finding an investor willing to make an offer on it when sales have begun to increase will be substantially easier, and it will make justifying your higher asking price even easier, too.
4. Expenses Impact Your Sale Price
Investors are going to use a few different strategies to figure out how much your business is worth to them. Primarily, these strategies are going to be based around your overall earnings and cash flow.
That means it’s important to start thinking about how your expenses are going to impact the final value multiplier being applied to your business.
You will need to make sure that your core expenses have been reduced as much as possible to keep the business healthy and attractive to investors, but you also need to make sure you’ve reduced unnecessary expenses as much as possible.
Before you start spending money on expenditures, ask yourself whether or not that expense is worth losing two to three times the amount in the final valuation of the business. That’s what your expenses are really going to cost you during the sale.
You don’t necessarily want to cut your core expenses, but you do need to stay aware of how you’re spending, where you’re spending, and how much money is going out each month.
While you can fine tune your business model to position it for the eventual sale date, there are quite a few experts available to help you build an exit strategy into the business model.
Working with a specialist can help you maximize your sale price without worrying about making sure you’re doing the right things and addressing the right areas.
Ready To Sell?
If you’ve found yourself in a position of wanting to sell your profitable business, ensure you are thinking about how you address all of the points listed above.
The information is not necessarily difficult to understand and implement, but it’s practical tips you can use to make your business more attractive when you’re ready to make an exit. You will stand out among the competition and be able to raise your company’s value in the eyes of potential buyers.