Shield's Top 5 Tips for Selling Your Business:
#5: "Be Dispensable"

Owner-managers often ask us "What are the most important things I can do to maximise the value of my business when I come to sell?"

That's always a good question to have, because it shows they are already thinking about managing value, rather than just managing the business.

But it's not an easy question to answer.

In fact it's taken me a couple of decades of buying and selling companies to get clear about the answers. Now we've decided to share them, in a series of five Hot Tips, starting the count-down with No 5:

Top 5 Tips for Selling a Business?
#5: Be Dispensable!

Before we get excited about maximising value in the sale of a business, let's be sure that you have something to sell.

The owner-manager who is a one-man band obviously doesn't.

Not so obviously, the owner-manager with a big staff who remains the lynch-pin of the business may have nothing saleable either.

Buyers worry what will happen to an owner-managed acquisition target when the owners are no longer there

physically (because they have retired)
or emotionally (because they have become wealthy).

If the owner-manager is the one and only salesperson, or has critical production know-how, will the business survive his or her departure?

Anything short of a clear "yes" to that, and you may well have a failed sale on your hands. As an advisor, I have learned this the hard way.

Remember: buyers buy the future, not the past.

Your brilliant past is not a saleable asset if it might disappear with you once the deal is done.

But even if you clear the saleability threshold, buyers' doubts about the future of your business after you have gone will reduce what they are willing to pay for it.

When it comes to selling a business, it's vital that shareholders bottle their brilliance

So you need to bottle that brilliance of yours.

You need to

pass on your pearls of wisdom
groom the next generation
systematise your savvy
root out any "key person dependence" - and kill it!

In short, you need to work towards making yourself redundant.

Not because it's good for your work/life balance (though it is!)
Nor because it's good for your spouse (though it is!)
But because it's good for saleability and value.

Make sure you have a good management team in place below the shareholding managers, and demonstrate that they can run the business successfully by themselves.

The most convincing way to prove that the business can thrive without you, is by having it thrive without you.

If you've spent time working in any big organisation, where making yourself indispensable is the key to long-term survival, this goes against the grain.

But to maximise the value of your owner-managed business, you must, must, must..be dispensable!

Once this threshold need is agreed, we can move up to the next critical tip for selling a business: Set your sights on the best buyers. But that's for next time..

Essential book on Value-Building now available to buy here

'Increase and Extract the Value of Your Business', co-written by Shield M&A's David Young, is an essential book for business owners and leaders, showing how to build value and make a business more saleable, what a sale involves and even how to realise value without losing control.

If you are interested in any of the following questions then this book is for you:

Can I realise value without selling/losing control?
How can I make my business more saleable?
How can I maximise value in my business?
What choices and alternatives are there?
What would a sale involve?
What is value?

Get your copy here

About Shield Corporate Finance

Shield's Chief Executive and Founder, David Young

In 2001, David Young founded Shield Corporate Finance as an independent specialist advisory firm, to provide world-class M&A advice without regard to transaction size and without conflicts of interest. With a special interest in the keys to success in divestiture work, Shield is committed to producing remarkable results for shareholders.