Episode 385: Could you sell your business tomorrow if you wanted to?
In this episode, Fiona shares insights on creating an exit strategy for your business. She also emphasizes the importance of considering systems, finances, staff engagement, and audience assets. Tune in!
You'll Learn How To:
The significance of transitioning in small businesses worldwide.
The importance of creating an exit strategy
Evaluating the attractiveness of your business
The value of audience assets
Addressing potential red flags
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Welcome to episode 385 of the My Daily Business Podcast. Today you're reading a quick tip episode and it's really where I share a tip, tool or tactic that you can implement all within about 10 minutes. Now, today's one is super important no matter where you are in your business, whether you are at a point where you're thinking about selling it, or if you have just started. Don't let the topic or title of today's podcast put you off. Before we get stuck into that, I want to acknowledge the traditional owners and custodians of the beautiful plan that I get to live on and work on and record this podcast. That is the Wurrung and Wurundjeri people of the Kulin Nation. I pay my respects to their elders, past and present, and acknowledge that sovereignty has never been ceded. Let's get into today's quick tip episode.
Now I get to work with small business owners all over the world. I've worked with people across Europe, Asia, the Americas, Australia, New Zealand and all of the places. One of the things that they often have in common is that they are in a period of transition. Transitioning, either expanding their business into new territories, maybe they're having a child for the first time, maybe they have a health challenge, they come to me to get help with figuring out their finances, their systems. Maybe they're hiring people for the first time, or hiring senior leadership people for the first time or getting investment. We work through that. If you've been reading this podcast and you didn't realize that's what I do, then hi, I'm Fiona. I'm a business coach and you can find all the ways to work with me at mydailybusiness.com.
Coming back to today's episode, one of the things that I've worked with several businesses on is creating an exit strategy. Looking at how they will sell their business, and how they'll move on from the business. That could be either them staying within the business for a longer earnout period, or it could be them getting it ready to sell. One of the things I will always tell anyone who's in that state to do is to read this little nifty book called Built to Sell. It is a good little one, it's written as fiction, but it's a nonfiction business book all about what would need to happen if you were to sell your business. It's quite old, but I think that a lot of the things in it still ring true. We'll link to that in the show notes.
It's just called Built to Sell. But even if you are not thinking about selling your business, the question I want to ask you today is how could you get your business to a stage where it would be attractive to somebody buying it. You may have no interest in selling, but what this allows you to do is to look at it from say an external perspective and think about, “Are your systems good? Where are they falling? Are your sales good? Does your profit look healthy?” A lot of the time people will look at the profit over a certain period of years and use different calculations to then offer you a price for your business. If you're not turning a profit or you're not turning a good one or a consistent one, then that's going to be a big red flag for people because they don't want to necessarily take that on.
They want to take on a business that is doing well and that they can come into. Other things that are valuable when it comes to selling your business that people don't often think about are things like your audience. Have you got a good email list? Have you got a good social media following? Not as strong sometimes as an email list. You have a direct amount of people to go straight to social media. Yes, it's fantastic, but as I always say, there's a lot more return on investment in other channels. But one of the things to think about in terms of this question is, if you were to sell tomorrow, firstly, what price would you want? But also, how attractive is your business? What are the things that are working well? What are the revenue streams just work and that have good profit margins?
What are the ones that need a bit of tweaking? What does your audience look like in terms of social media, following your email list? Also, just your general engagement. Do you know your numbers? Do you know how much that has grown over the years? Do you also know your financials? That's a huge part of buying a business and looking at everything from the lens of if somebody was to buy this, how well is it set up? For example, in your systems and processes, you might work well in our customer service department or our warehouse and logistics. But when it comes to HR, we have next to no policies, we don't do annual reviews very well. We don't have any way of tracking how engaged our staff are. If we sell, would they just all walk out if it was us, are they interested in their job and their role and the company, or are they just loving us as leaders?
And if we left, they would kind of feel like they could leave too. Questioning all of these things and thinking about it from the perspective of, “If I was going to sell this business, what would need to change to make it attractive to a buyer?” As I said, some people might be reading this and you've just started your business. In some ways, you are in a great position because you can start thinking about, “What are the systems that we need to set up and how can we set them up in a way where they can be easily adapted and easily changed?” For example, are we using digital methods to set these up? Have we got old-school books and stationery where things are kept that are not necessarily the most efficient of systems? For example, I went recently to get a blood test and I was shocked at my GP, which I've been going to forever, they had sent me the wrong blood test and only when I got into get the blood test, the person at Dovi was like, “Is this your surname?”
And I was like, “No, but the first name was correct.” And they were like, “I was thinking, you look young for this date of birth.” I went back out to the GP the practice kind of manager area, and I was like, “I've got the wrong blood test.” Which one is a major? I would say breach of privacy. But also they were like, “When did you call in? And who would've taken the call?” Then they figured out where that person was sitting on the desks and then they went through her bin to go through the file that would've been sent by the doctor. She would've printed it out and then faxed it somewhere. And I was like, “Are we in like 1994? Like, is this actually how you run things?” And I said to them, “Can't you just download my form for the blood test?”
And they're like, “No, it all has to go through this and we have to print it out.” And then after we print it out, the process is to put it in the bin. And I'm like, “If I hadn't organized this yesterday and the bin had already been collected, you would have no way of finding this information.” And they're like, “Pretty much, because it's a Saturday and the doctors aren't in.” I was just mind-blown. That system for me personally would not be an attractive one to try to buy into now. I'm not saying I have no idea how GP practices work and I'm not a GP, but it seemed very convoluted to me and not an efficient system. You may have systems in your business that you're like, “We've just always done it this way.”
And then so and tells her and then that's done there. Or you print this off and then it gets walked down to the warehouse and it's like, “That probably wouldn't cut it.” Maybe it's cut it for like the last five years, but really if we were going to sell, we would be upgrading to a digital way of doing these things. It's looking at all of these things, your systems, your finances, your staff, your staffing models, and even things like how long staff had stayed there. Because that can sometimes be a metric for people buying to be like, “They've got engaged staff, their staff are happy there.” You've got consistent ways of reviewing and giving people increases in pay and all of that. There are so many questions here, but it's asking yourself, “If I were to sell my business tomorrow, what are the things that would stand out to somebody potentially buying it as a red flag or as an inefficient way of doing it?”
Those are the areas that potentially you need to focus on in 2024, regardless of whether you're going to sell the business or not. Because it's much like when you sell a house, you start fixing all the things that you've kind of lived with and it's only after you fix them. I know from experience that you start thinking, why didn't we fix that when we lived here? Why didn't we enjoy that? I did this for my dad's house when we were selling it. We did it for our house last year. We started fixing things that honestly really didn't cost that much to fix, but we had lived with them for eight years. And the same goes for your business. If you had somebody who was subtly interested and gave you a charming offer, you would have to start fixing things quickly. You may start fixing those things now on the off chance that you do want to sell, but also just to enjoy for yourself, to have a better efficient process for yourself, to understand your numbers yourself, to grow your audience or yourself and the betterment of your business.
I hope that gives you something to think about. The question is really to ask yourself, “Could you sell your business tomorrow if you wanted to? And if not, what do you need to work on now?” I'll leave it there. We'll put a link to the book that I mentioned in the show notes, and you'll be able to find the show notes for this episode at mydailybusiness.com/podcast/385. I would love to know if you are selling your business or if you have sold a business in the past, what are the sort of things that you needed to fix up? You can always send us a DM at mydailybusiness_ or an email hello@mydailybusiness.com. If you're on TikTok, we're just at mydailybusiness. Take care. I'll see you next time. Bye.
