by Pat Alacqua and Jane Gentry, Business Beacon
Building a business is an adventure filled with challenges and victories. A powerful yet often overlooked strategy seasoned entrepreneurs and business operators use is ‘Building to Sell’, which enhances value, scalability, and sustainability.
Why is adopting this mindset a game-changer, even if you have no plans to sell? Because it shifts the focus to creating an intrinsically valuable business.
Why Build to Sell?
Building to sell is counterintuitive if you’re deeply invested in your business. Yet, it’s about crafting a company attractive to you and potential buyers—ensuring sustainability, scalability, and value.
Value Drivers: The Core of Your Business
Value drivers are the components that substantially increase your company’s worth. They are the elements that, when managed well, bolster the business’s financial performance, growth potential, and sustainability. They’re what buyers scrutinize and can vary based on industry and market position.
These are ten common key value drivers:
- Recurring Revenue: Reliable and predictable income streams that assure future cash flows.
- Customer Diversity: A broad customer base mitigates the risk of losing any single client.
- Market Position: A robust and defensible position in the market.
- Brand Equity: The value of the company’s brand and customer reputation.
- Scalable Business Model: The ability of a business to grow without being hampered by its structure, systems, or available resources.
- Operational Efficiency: Streamlined and cost-effective operations that maximize profits.
- Innovative Capabilities: The ability to develop new products or services that meet evolving customer needs.
- Strategic Partnerships: Alliances and partnerships that provide leverage in the market.
- Intellectual Property: Patents, trademarks, and copyrights that protect products, services, and ideas from competition.
- Strong Management Team: Leadership that can drive the company forward and manage operations effectively.
Reflect on these. Which do you excel at, and what unique drivers does your business have?
Optimizing these drivers is part of preparing your business for any transition, be it a sale or succession to a family member or management team.
A business that optimizes its value drivers will likely thrive and command a higher market price. Here are some additional thoughts that take your business beyond income generation to real wealth creation:
Building Systems for Independence
Can your business run without you?
Systems and processes that allow your company to operate independently of any one person, including the owner, increase its value and offer personal freedom to pursue other ventures.
Sustainability and Scalability
A business designed for succession or to sell is resilient and adaptable, not overly dependent on single clients or trends. It’s built to withstand market fluctuations and is poised for continuous growth.
Financial Health: Beyond Sales
Building with a sale in mind emphasizes not just sales but profit margins and efficient cash flow management, resulting in a stable and profitable operation.
Quantifying Value Driver Improvements
Understanding the impact of your efforts means measuring key aspects:
- Recurring Revenue: Track annual growth in recurring revenue.
- Customer Diversity: Ensure no single client dominates your revenue streams.
- Operational Efficiency: Monitor operating margins and cost per unit for improvements.
Risk Management: Securing The Future of Your Business
A key aspect of building to sell is minimizing risks. It’s not solely about safeguarding the day-to-day operations; it’s about future-proofing your business to make it appealing and ready for whatever transition lies ahead, be it a sale or a succession transition. This includes maintaining a solid cash reserve, diversifying income, and ensuring your business isn’t overly reliant on any individual.
Attracting Investment
A business built to sell demonstrates growth potential and a clear exit strategy, making it more appealing to investors seeking profitable, long-term growth ventures.
Personal Freedom
Building to sell grants you the freedom to live on your terms with a business that thrives independently of your daily involvement.
The Transformative Power of Building to Sell
Building to sell is a strategy that transcends the act of selling itself. It’s about setting a foundation for growth, sustainability, and freedom in your business endeavors. By integrating this mindset into your business planning and operations, you create a more appealing venture to potential buyers: more robust, resilient, and capable of flourishing long into the future.
Even if you never sell, the principles of building to sell can lead to a more fulfilling and successful business-building journey.
Consider the build-to-sell strategy as a guiding principle from the day you open the doors when you’re in the early stages of your startup, looking to scale, or have experienced solid growth and are considering next-level plans. It could transform your business and life in ways you never imagined.
As we wrap up our journey through the build-to-sell strategy, consider this an invitation to action. Evaluate your business, bolster your value drivers, and start building not just for today but for a prosperous tomorrow.
As featured contributors to the ECN Business Beacon Series, Pat Alacqua and Jane Gentry share their ‘Building to Sell’ strategy and tips that are a blueprint for fostering growth, sustainability, and self-reliance in your business. By adopting this approach, you evolve from merely generating income to building lasting wealth. Embark on a journey toward a prosperous legacy, with or without the intention to sell.
Visit OptimumValueBlueprint.com now and take the first step towards achieving peak business value.
This story originally appeared in the Q2 2024 issue of Exhibit City News, p. 30. For original layout, visit https://issuu.com/exhibitcitynews/docs/ecn_q1_2024.
