If you can’t imagine your business being successful without you, a buyer probably can’t either,” says Ron Edmonds, the owner of the Principium Group. Selling your company is tempting. You would finally have all the free time in the world, not to mention the money you would have from the sale. Your company may seem like the prime candidate for this opportunity, but would it be as sellable if you took yourself out of the equation? As Edmonds describes, if you cannot picture your company without you, neither can a buyer, so selling is most likely not your best option.
Principium Group helps customers buy and sell green industry businesses worldwide. As the owner of Principium, Edmonds has witnessed plenty of sales fall through for a variety of reasons. But a business revolving around the owner is a main reason for many unsuccessful sales pitches, he says. It is a mistake that happens frequently because the owner sees the inherent profitability of the company and fails to see that the reason for this value is a huge red flag to buyers.
Edmonds says these are the questions buyers will ask when evaluating your business: “How does that business operate if that guy isn’t there? How do you shift away from being a person who the business revolves completely around?”
More than just the owner
Be wary of not accounting for your human capital when considering your business’ profitability, and that does not just mean your value as the company’s leader. Edmonds says buyers will look to see if the business owner is the primary salesman or if the owner is also the company’s most successful landscape designer. If you are not only successfully running your business but you are also leading a certain sector of your business, once your talents leave the buyer is left with a different company than what it just acquired. In short, your skills could actually be your downfall one day.
What’s in a name?
As Edmonds explains, it is not just your invaluable expertise that could negatively affect your ability to sell. There is one key decision that many businesses make when forming their companies that often has a negative effect later down the road. Having an eponymous company may seem exciting in the beginning, but to a buyer, if your name is on the building and you aren’t there, it makes it less sellable. Clients will expect to work with the man or woman bearing the company’s name, and with you not there that’s an excuse for a buyer to not take the sale.
All about the team
If you own a company, it is not unlikely that your presence has played a huge part in the success of your business. If you are considering selling, however, take a hard look at the role you play in the company. It is not that you should not work your hardest for your company, however. Remember, selling or not, there will come a time when you will not play an active role in your business. Start training qualified employees to learn the ropes and to manage some of your tasks because what a buyer wants is fairly simple.
“A buyer just wants a quality team,” Edmonds explains.
Whether it’s your name on the door or your invaluable knowledge of the industry, you are likely an integral part of your business. If you are looking to sell, however, take a step back and think of how your involvement may look to a buyer and how you can begin transitioning some responsibilities to your highly capable team.