How do you know if your business is sellable?
A business is sellable when a buyer can see it keep making money after you leave. That comes down to three questions. Does it run without you? Is there enough steady profit to support the price? Could a new owner pick up how it works? Three yeses and you have something a buyer can finance and take over. A no on any of them can usually be fixed, and the earlier you start, the more of the price you keep.
20 minutes to start. No pressure either way, including no pressure to sell.
Sound familiar?
Most owners have never sold a business before. There's no reason you'd know what a buyer looks for. So here it is, in plain language.
The three questions every buyer is really asking
Would it keep running without you?
A buyer wants a business, and if everything runs through you, what they'd actually be buying is your job. Watch for clients who ask for you by name, quotes only you can price, and key relationships that live in your phone.
Is there enough profit to support the price?
Buyers pay based on what the business earns, and most buy with a loan. If profit is thin, or swings a lot from year to year, the lender won't back the number you have in mind.
Could someone else pick it up?
How you price, hire, deliver and follow up. If the only manual is in your head, the buyer is taking on risk, and they'll want a lower price to cover it.
Any one of these, handled early, barely matters. Found late by a buyer's due diligence team, it becomes their best reason to offer less.
Why so many listed businesses never close.
The figure brokers usually quote is that 70 to 80% of businesses listed for sale never sell.
Usually the owner lists it first and finds out what a buyer sees second. By then the fixes take longer than the buyer is willing to wait.
Most owners start thinking about this about 18 months before they want out. Three to five years is better. Eighteen months still works, you just have fewer moves.
The work that makes a business pay you properly is most of the work that makes it worth buying.
A quick self-check
Yes or no. No one's grading it.
Could you take a month off without a call about a decision only you can make?
Would losing your biggest client hurt, or sink you? A buyer asks the same question about every client on the list.
Is your profit steady, or does it jump around from year to year?
Does some of your revenue repeat without you going out to win it again? Contracts, memberships, repeat clients.
Is anything written down that a new owner could follow on day one?
Would your books hold up if someone else's accountant went through them line by line?
Every "no" is a place a buyer will push on price. Every one of them can be worked on. The full read I do with owners covers 11 factors, from Financial Muscle to Due Diligence Readiness, and these six questions touch most of them.
What this is, and where it stops.
This is a readiness read: what's pulling the number down, and what to fix first. It isn't a formal valuation, and I'm not a business broker or a valuation expert. When it's time for either, I'll say so, and I'm glad to work alongside whoever you choose.
Questions
What makes a small business hard to sell?
Usually one of three things. It runs entirely through the owner, the profit is too thin or too uneven to support a price, or nothing is written down for a new owner to follow. Most businesses that struggle to sell have at least one of these, and many have two.
How far ahead should I start preparing to sell?
Three to five years out is ideal. Most owners start about 18 months out, which still works. You just have fewer moves available.
Can I sell a business that depends on me?
Often, yes, but usually for less, and often with you staying on through a transition or with part of the price tied to how the business does after you leave. Reducing that dependence before you list is one of the most direct ways to move the number.
Is this a business valuation?
No. It's a readiness score and an estimate of the gap between what the business could fetch today and what it could fetch with the right work first. A formal valuation comes from a valuation professional, usually closer to a sale.
Do I still need a business broker?
For the sale itself, usually yes. My work comes before that, getting the business ready so your broker has something that can close. I'm glad to work alongside yours.
Twenty minutes to find out where you stand.
No pressure either way.
Not sure you want to sell, or just tired? Growing one might be your door.