Choose your business name and then choose your buyer
It sounds counter intuitive, but any new business owner needs to think about to whom they are selling their business on Day 1 of their new venture. That’s right; Day 1.
Think about this as on one of the key aspects of your decision to start your business in the first case. if you can’t see the exit, then take more time to find one. There is no point in having the start of a business, perhaps some ideas around a goal, but not knowing where the end of the business may lie. While some people may think of a business as a ‘yield’ business, where you simply earn income and when you are ‘done’ you just shut the doors. That is one option, but the ideal business is one that has both ‘yield’ and ‘capital’, where you can generate income throughout your ownership in terms of profits, but also have an asset to sell at the right time. In an ideal case, you need to do both. If you are only planning on the first ‘yield’ option, then you might consider working as an employee of a company. A lot less risk and more guarantee of an income. If you are interested in doing both, then read on.
While its hard to develop and run a business, make sure you spend time to decide how you are going to sell it when you are ready. Here are some questions to ask yourself.
Who is likely to buy this business? Name the companies. List them out on a piece of paper. It might be other competitors, players in similar and aligned industries, certain private equity groups or family investors. The main thing is that you list them down and identify them early. If you are struggling here, then spend longer.
Why would someone buy the business? Ask yourself Why? Why would someone buy this business? Is it because they need you? Your technology? Your customer list? Your revenue stream? Try and work out for each and every name that you listed above, why they would buy your company. They will likely be different across different buyers.
“You might find, for example, that one potential Buyer, really lacks customers in the financial services space. That might be an incentive for you to go after that space first, so that you have something of significant value to offer them when they come looking”.
Build your strategy with your buyers in view. Once you have established your buyer and what they are looking for and you have narrowed down to one or two strategic options, then start building your strategy. Of course, strategic decisions are updated annually or even more often, so don’t get too caught up on trying to map out every element of your strategy. The important thing is that you are constantly thinking. Am I building this business with a clear exit in mind? Has the list of buyers changed? Have their needs or wants changed? Have their businesses changed that makes the likelihood of them buying my business changed?