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How Owner-Dependent is Your Business? It Might Affect Its Sale
If looking to sell your business, it's important to consider how owner-dependent your business is. Are you the business itself, as some say?
If this is the case, it's important to find ways to better automate your business. Hiring a manager or promoting a star employee to a more managerial position with more responsibility are a couple of ways to improve the marketability of your opportunity.
How Owner-Dependence Can Affect The Ability to Sell Your Business
Owner dependence has a major impact on the potential sale of your business. If a business is heavily dependent on you for its day-to-day operation, this can reduce its value and limit the number of potential buyers. Buyers, when looking at an existing business, will want to know the roles of the owner. If you are heavily relied upon in all of the day-to-day operations of the business, your departure can dramatically decrease the company's value, or make it completely unsellable to buyers unless they possesses a very similar skill set and level of experience. How Owner Dependence Affects Price and Deal Structure Most buyers will notice what the absence of the owner means to a company's value. They'll consider its impact on future sales and critical relationships and what it means when you'll no longer be involved. They'll apply this risk to the valuation model when determining the price they're willing to pay for your business. If the buyer has concerns over transferability and reliance on existing leadership, there may be less cash offered, more contingencies, or different, less-favorable terms proposed. How Owner Involvement Affects Marketability of Your Opportunity If you're heavily involved in the day-to-day operations of your business, then many buyers may find it difficult to envision purchasing your business or creating a viable transition plan. Uncertainty over owner involvement will slow the process down, even in the more risk-tolerant buyers.Signs That You May Be Overly Involved In Your Business - And How to Overcome the Issue
Wondering if you're overly involved in your business? Here are some signs:
Decision maker on all contractors or external workers: Contracting parts of your business to external workers is a great way to reduce payroll, overhead costs and free your employees up to concentrate on tasks you'd prefer. However, if all decisions to hire contractors and what tasks they will assigned have to run through you, you may be too involved. If you're the point of contact for all business relationships, and no one else in the company is, that's a problem. Train a manager to be able to take on these decisions and make some important introductions, as this will help during the transfer of the business.
Growth depends on you: Are you deeply involved in the complex, technical or personal aspects needed to continue the growth of your company? If the company depends on you to get orders fulfilled or work completed it can be worrisome for a potential buyer. Training your sales team to perform and continue building business without your direct involvement is one way to improve this situation.
CC'd on every email: Are you cc'd or bcc'd on emails throughout the day? If that's the case, you may be holding too much control. While it's important to be informed, you may be creating a workforce that is afraid to do anything without your approval. Loosen up the reins a little, and teach your employees to be able to make decisions on their own (within reason of course).
Create a Less Owner-Dependent Business to Open Up Your Opportunity to More Buyers
Thankfully, in most businesses, there are ways to make the business less dependent on the owner. It's important, if considering selling your business, that you begin to prepare your management team, employees and contractors / services to be able to continue running without your presence. This is crucial to the value of your business when it hits the market.