Buyers discount valuations when they see the founder running critical functions. Separate yourself from customer service, marketing, and supply chain by hiring or outsourcing at least six to twelve months before selling. This eliminates founder's risk and can double your exit price.
If you change this, you can sell your business for twice as much money. There's something called founders risk and that is simply what the risk is if the founder were to go away. If you're looking to sell your business in the next few years, you will have to think about reducing founders risk. So here's how you do that. If you break the business into different functions as obvious as customer service or marketing or supply chain management, and you're in charge of any of those functions, it's time to either hire someone or to find an agency that can do it for you. A couple of things happen. First of all, they can probably do it better than you, so that's cost neutral. And second, it frees up your time to think about growth. So now you're thinking about making the business more profitable. But most importantly, it reduces founders risk. So when you go to sell the business, you're getting a higher multiple than if you are controlling that function yourself. This is something you have to think about at least six to 12 months before you start to think about selling your business. Because if a buyer comes in and looks at your business and you're in the way of any of these functions, it can knock like a full one year's profit off your valuation. Fix that, you get that money back just in terms of valuation, and now you're in a much stronger position to negotiate a higher price when you sell your business.
