What are your business goals for the year? If you’re like most owners, you have a profit goal you want to hit. You may also have a top line revenue number that’s important to you. While those goals are important, there is another objective that may have an even bigger payoff: building a valuable business.
But what if you don’t want to sell your business? That’s irrelevant. Here are five reasons why building a sellable business should be your most important goal, regardless of when you plan to push the eject button:
- Value means Freedom
One of the fundamental tenants of value is how well your company would perform if you were unable to work for a while. As long as your business is dependent on you personally, there’s not much to sell. Making your company less dependent on you, by building a management team and creating clear systems for employees to follow, means you have the ability to spend time away from your business. This could open up a world of possibilities for your time.
- Value is Financial Freedom
Each month you open your brokerage statement to see how your portfolio is doing. Not because you want to sell your portfolio, but because you want to know where you stand on the journey to financial freedom. Creating a sellable business also allows you peace of mind, knowing that you’re building something that, like your stock portfolio, has value you could choose to make liquid one day.
- Valuable Businesses are Enjoyable
Running a business would be more enjoyable if you were able to spend your days on strategic thinking and big picture ideas. Instead, most business owners spend the majority of their day on the minutia: the government forms, the employee performance reviews, bank reconciliations, customer issues, etc. The boring details of company ownership suck the enjoyment out of owning a business. It is exactly these tasks you need to get into someone else’s job description if you’re ever going to sell.
- Value is a Gift
Imagine that your first-born graduates from college and as a gift you give your prized 1967 Shelby Ford Mustang. Your heavily indebted child takes it on the road, but after a few miles, the engine starts smoking. The mechanic takes one look under the hood and declares that the engine needs a rebuild. You thought you were giving your child an incredible asset, but instead it’s an expensive liability he can’t afford to keep, and nor can it be sold without feeling guilty.
You may be planning to pass your business on to your children or let your managers buy into your company over time. These are both admirable exit options, but if your business is too dependent on you, and it hasn’t been tuned up to run without you, you may be passing along a jalopy.
- Value can’t be Rushed
There are some things in life that take time, no matter how much you want to rush them. Making your business valuable often requires significant changes; and a prospective buyer is going to want to see how your business has performed for the three years after you have made the changes required to make your business sellable. Therefore, if you want to sell in five years, you need to start making your business valuable now so the changes have time to take root.