There are many reasons why businesses don’t sell. It may be down to inflated price or bad timing. But it may also be because the business is too dependent on the current owner for its day-to-day management and ongoing success. That’s not a very attractive prospect for any potential new owner!
As weird as it sounds, in order to make your business more saleable, it needs to be able to function successfully without you at the helm.
Although our ISOP succession plan is primarily focused on passing ownership to employees or family members, it can be used as a stepping stone to an eventual outright sale to a third party. How? Well, business development is a key step in the ISOP planning process. At the heart of that business development is building a business that can function well without you.
Employee owned companies are an attractive financial prospect in their own right. They tend to make more money than their competitors, they have more motivated employees, and they have higher staff retention rates. ISOP moves your business to an employee ownership model, harnessing the power of your employees by giving them greater leadership responsibility. As a result, the business becomes less dependent on you. (And you get more time to enjoy the things you love.)
I’d advise any business owner to start thinking about the saleability of their business sooner rather than later. Even if you think you won’t want to sell for many years, you should start building your company up so it’s ready to sell, when the time eventually comes. ISOP is a great way to achieve this. Thanks to the succession planning and business development work, the business will be worth more and it should be far more attractive to potential buyers.
Basically, when the time is right to sell (and timing is everything), the business will be ready to sell.
This post is based on an extract of my book Do More of What You Love: The New Approach to Business Succession Planning, out now.