If you’ve started seriously looking at selling your business, you probably realise that there are a lot of mistakes you can make. One of the biggest is making yourself indispensable to your business. This can affect how long it takes to sell your business, lower its value and even slow business growth years before you’re ready to sell. Even if you’re just considering selling your business, this is a mistake you should address as soon as you become aware of it.
Why You Should Make Yourself Obsolete
The primary attribute buyers look for in a business they’re thinking of buying is its ability to make money. If the business relies on you, the current owner, to make that money, then this increases the risk to the buyer. After all, if you’re the only person who understands the products, services or procedures of the company, there’s a chance a new buyer won’t be able to replicate the current profits.
Additionally, if you’re indispensable, this can raise concerns about the state of the business. You may have heard the advice, “Work on your business, not in your business”, and savvy buyers know that indispensable owners have been working in their business instead of being strategic and growing it. They’ll question if this is because there isn’t enough profit to hire competent staff and wonder if they’re buying themselves a job rather than a business.
The Hawaii Test
So how do you know if you’re indispensable? Start with the Hawaii test. Imagine you’re flying to Hawaii at the end of the week for a whole month. You’re not taking your phone or computer and don’t plan to check your emails at all. Has your business continued to operate without you? Has it made a profit? Has it continued to grow? Will the business still get new customers or create new products if you’re not there?
If your answer to those questions is yes, congratulations, your business doesn’t depend on you. If you’re wondering who would do everything while you’re away or are thinking about all the work that will be on your desk when you get back because there are things only you can do, then you have some work to do to extricate yourself from the day-to-day running of your business.
Lessen the Dependence on You
To start the process of making yourself obsolete, look at everything you do. Think about every part of your business, from the finances to securing clients to product design and production and everything in between. Make a list of everything in your business that would not operate smoothly without your input.
The next step is to document all the steps you take to complete those tasks. Think specifically about all the little jobs that must be done to make a profit in the business. Having systems and procedures in place is something that a potential buyer looks for, so doing this now will save you time later in the sales process. It also makes handing over to the new owner easier.
The final step is to train your staff. Hopefully, you have people on your team whom you trust, and it’s time to let them take more responsibility. Your aim is to solidify your management team prior to the sale. If you can, train more than one team member in each job, and teach your staff more than one task. The more they know about keeping the business running smoothly, the more likely it is they’ll be kept on by the new owners, so this helps them as well.
If you’re indispensable in your business, you’re probably spending more time running than growing your business, and this will be obvious to buyers. It makes your business a risky proposition and may drive down the value or even drive buyers away. If your business can’t run without you, take time early in the sales process to make sure it can.
For further information, contact your nearest LINK Business Broking Office.