Many reasons exist for why you should try to make yourself redundant in your own business. Being essential in its day-to-day running means you can never take a holiday or get sick. It adds stress, as you need to be a part of every decision. You’re always working in your business, not on it, leaving no time to plan for growth.
What you might not know is that if you’re essential to the running of your business, you may have problems selling it. And if you do sell, you may find the price is not what you hoped. Prospective buyers look at owner-dependent businesses as risky propositions, so take the following steps to increase the value of your business by making it independent of you.
1. Ask Questions
What will your business look like when it’s ready to be sold? Will all your customer offerings remain the same, or will you pare them down to the most profitable products and services? How essential are you to these products and services?
Asking these questions allows you to get clear on how to make your business as attractive as possible.
2. Decide on the Critical Functions
What are the things that must happen to ensure your business continues to make money? These are the critical functions and should not be limited to making your product or providing your service. Marketing, generating leads, converting leads to sales, training new team members, administration and personnel management should also be considered critical to the operation of your business. Are you critical to any of these steps and how can you ensure someone else can handle the task?
3. Document the Processes
A large part of the sale of your business relies on being able to transfer knowledge to new owners. If this knowledge is trapped in the current owner’s head, it means a long handover period or the information is lost when you depart.
Well-documented processes are essential to making yourself redundant and selling your business. A business with everything written down looks a lot less risky to prospective buyers.
Imagine you’re teaching a beginner what you do and write down every step. Start with the big picture, such as the life-cycle of a customer, then focus in so that everything is documented. This allows the business to continue seamlessly when a new owner takes over.
4. Build a Strong Team
Now that you have the procedures documented, it’s time to hire a strong team to handle critical functions. Having an established team reassures a prospective buyer that the business will continue to run as the ownership transitions.
Ensure your team understands every aspect of the business. If you’re the one that normally finds clients, closes sales or designs new products, make sure you have a new staff member who can take over these jobs. Spend time training the new staff and creating your dream business.
5. Take a Step Back and Let Your Team Work
It’s time to get out of your business’ way. Take a break. Fly overseas, renovate your bathroom or visit your in-laws. Don’t check your emails. The purpose of this step is to ensure that your business can run without you.
You’ve created it, helped it grow stronger and now it’s independent and you can leave it to run on its own. This is an essential step. When you go back to the office after a break, your new team will be able to point to holes in the process and places where you are still needed. Or, hopefully, you’ll come back to everything running smoothly and a continued profit.
This will tell you what you need to fix for prospective buyers or if you’re ready to get your business on the market.
Owner dependence is one of the most important factors in the valuation of a business. Buyers know that in an owner-dependent business, much of the value can be destroyed as soon as the owner departs. Taking steps to make your business independent will help you get the best price when you’re ready to sell.
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