15 Tips for Building a Business You Can Sell

Hey, this is Hector Santiabo. I'm the producer of Business Lunch. And today's episode is another snackable episode with Roland. Something that is bite sized that you can get through while you are washing the dishes, cleaning up around the house or on that quick drive to the grocery store. But we want to make sure that we give these to you because Roland has been on a mission over the last little bit to really help as many entrepreneurs take their life and their business to the next level. And so these snackable episodes are going to come out every week so that you can have bite size, actionable tactics and strategies that you can start to use right away. And if you know another entrepreneur that's looking to invest, acquire, or one day sell their business, we ask that you please share an episode with them as well. Thanks for tuning in today. We're going to get into the episode with Roland right after this quick break.

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Roland Frazier here. Some things to think about when you're looking at selling your business that you want to kind of have together before you go to market would be to be sure that, number one, you're in an industry that is trending up. You don't want to sell if your industry is out of favor right now. So if they're not liking fracking or solar or whatever you do, then that's A terrible time to sell. Another thing to be sure you've got in place is a depth of management team, meaning that you have enough people to take over and run if any of your key people leave or if you leave one other would be SOPs, standard operating procedures. What are the systems and processes that you've got in place? The more of those that you have, the easier it is for someone else to come in and run the business. Another one would be the identification of really good acquisition targets that your company could buy or be part of along a lot of times when bigger companies like private equity buys, they're looking for a platform company that can then be built by acquiring other companies. They'll also look at how much competition is in the industry and are you one of the top, usually one to five leading brands within whatever niche or sub niche that your company is in. They're going to look at what are the sector growth prospects. So what is the growth prospect for the industry that you're in? Is it growing at a good clip? They're going to look at the stability and the quality of the revenue that you've got. How much can they count on that and is there any recurring revenue so that that reduces risk for them? They're going to want to be sure that you've got a proven business model so that the way that you're making money is one that's been proven over time. For example, if you're dependent on just SEO search engine optimization, that's going to be really hard because if something happens to the algorithm at Google and you're no longer listed, your entire business could go completely away. And then the length of time that the business has been around and how big its customer base is and has been in terms of consistency over time. Some things to consider when you're getting ready to take your business to market. Another would be the online footprint. How big is the business online? How many people know about it? We know Amazon is giant. How big is your business? That's something that people are going to look at. The next would be is the business direct to consumer? Is it B2B? Is it B2C? Direct to consumer? Businesses typically sell for more because there are no distributors in between. B2C might sell for more depending on how big they are. Typically their total addressable market is bigger. But B2B businesses can be quite valuable as well. Brand recognition is another. Buyers look at how well known is the brand. We've all heard of Hermes or Chanel, but we might not have heard of a smaller brand or maybe the brand has a lot of traction in a specific niche industry. Like everybody knows about this, this who rides horses or something like that. The next would be what are you doing? That is giving back and that is good in the world. So dei, which is diversity, equity and inclusion, meaning how can we have a diverse appeal of customers and people that work for a company and have this be inclusive and give people equity in the outcomes of what's going on. And also esg, which is how sensitive to the environment is the company, what is the social good that it's doing? What governance does it have in place to ensure that it's doing these good things as checks and balances on the company and what it's doing? What are the barriers to entry would be another factor. How hard is it to get into this business? Drop shipping, for example, zero barrier to entry. Anybody can go on Alibaba and go to one of those companies and start selling stuff, branded, patented things. Much, much more valuable. Another would be how much cap X, how much, how much like equipment is required in the business. If there's a lot of equipment, then we know that eventually it's going to wear out. We're going to have to replace it. Or maybe it's rapidly evolving like in the audio visual industry and we have new cameras that are coming out all the time. So the things that we have are decreasing in value and have to be replaced. That's going to be a concern. Another would be defensible ip. I mentioned this a little bit earlier in terms of brand. Brand is an ip, patents, copyrights, trademarks, customer lists, trade secrets. The best of which example would be either the Kentucky Fried Chicken recipe or Coca Cola's recipe for Coke. And then last but not least, especially now after the pandemic, what about onshore supply chains versus offshore? Can you get your stuff to make or sell from the country that you're located in? Because if a pandemic happens, countries get shut down, supply chains get jammed and it becomes a lot harder. So some things to consider when you're looking at how can you create a business that has high appeal to someone to acquire.

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Hey business lunch listeners. We're going to get right back to the show, but Roland wanted me to invite you to a brand new training that he's doing on acquiring Businesses with no money out of pocket. It's something that he's talked quite a bit about on the show, but he's doing a free training where he's going to walk through the entire process. So if you want to get access to that, go to businesslunchpodcast.com epic that's businesslunchpodcast.com epic and you can get signed up.

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