My business started to really take off in the second half of 2015.. Sales were doubling every month ending in our first 100k+ month in December. This was very exciting! Also stressful..
I remember stressing about our inventory and being out of stock.. Staying up late hours in Asia to coordinate with custom brokers..
Not even sure how much money we were making or if we had money to pay for our reorders..
I knew if I wanted to build a successful business something would have to change. So, I committed to my vision of building a business that I could scale and sell. Over the next few years I worked hard to make my dream a reality. I got my business organized and got the team in place to execute.
Fast forward a few years and unexpectedly, I had the opportunity for a sale..
Thankfully, I was ready.
My hard work paid off and resulted in a ~million dollar exit. All thanks to the system that I build to scale and sell my business.
Now, I want to share that system with you.
1. Commit to Your Vision
The first thing you need to do is decide what you want and commit to it. This is critical! If you don’t know where you want to go, you will surely get there. Think long and hard about what your goals are for your business.
Do you want to have a 7 figure exit? Cashflow lifestyle business? What sort of work do you want to do in your business?
An effective tool for helping you with your visions is Quarterly Planning.
Take time every quarter to review your wins and challenges. And also to determine the next steps to focus on for your business.
You can get access to the template that I use for my businesses at SellerPlex.com/URL
My whole business transformed when I realized the power of good SOPs and Systems. At first, it felt like I was running around putting out fires all day. When I realized how to utilize good SOPs and Systems, everything changed.
My business transformed from Chaos to Order.
Fires stopped happening.
The business was growing and not breaking.
This is KEY for any business that wants to scale and sell. You simply can not move forward without it.
To get started, look at the activities you are doing daily. Start with the easiest and repeatable tasks - for example customer service. Jot down notes on what questions you are getting and how you answer in a document.
Don’t over complicate it!
Your SOP is a living document that you can continue to update as you move forward.
After you get your easy/repeatable task documented it’s time to turn to your challenging one that can really make an impact.
For eCommerce businesses this is often implementing a reorder calculator.
Staying in stock is the most important thing for ecom businesses. So getting a good process in place is absolutely critical.
Check out SellerPlex.com for more resources on creating reorder calculators.
3. Build Your Rockstar Organization
Now that you have some systems in place, get someone else to execute them!
This is the next step to unplug yourself from the operations of the business and allow you to elevate to a true Business Owner.
When building your team, start with your Organizational Chart.
For ecom businesses, your Org Chart will likely look something like this:
When your business is small and starting out. You will be fulfilling all of the roles. When you start to bring other people in to assist you, they likely will be doing multiple roles too.
One person can fill multiple seats, but you can not have more than one person in the same seat.
This is critical for accountability.
As your business grows, you’ll want to get more specialists in each role that can do the job better than you can.
It wasn’t until I got better people on my team in the seats for Marketing, Operations and Finance that my business was really able to take off and scale.
All without more pressure and headache for me.
4. Finances on Point
The first question of any buyer when assessing a business for purchase is to review their financials.
Your financials are what prove that your business has value and are what your sale price is based on.
You need to have complete and correct financials to even begin to start a sales process for your business.
‘Correct’ means your bookkeeping and P/L need to be categorized correctly with proper verification. ‘Complete’ means showing the buyer at least 1 year (likely 2+ years for larger sales) of your correct financial data.
So, it’s best to get on top of these ASAP so you aren’t left scrambling at the finish line.
SellerPlex works with businesses that have decided that they want to pursue an exit. Part of the onboarding and assessment is running them through our Financial Audit.
It is far too common that businesses that we audit that think they are on top of their finances (complete and correct), but in reality, they are either incomplete or are doing it wrong.
Often requiring our team to go in and clean up/re-do finances from 6 months, 1 year or more.
This is not a problem for SellerPlex because our team can help them get their finances sorted for sure.
It’s just unfortunate for the buyer who wants to move forward with their sale as soon as possible and now is delayed and has to pay more money to get this necessary piece sorted.
Not only is having complete and historical finances 100% necessary if you want to sell your business, there is also immense value and insight to be used for you to grow your business.
This is one of the most commonly overlooked opportunities for businesses that we work with.
We’ll get into how to use your finances to improve your business and its value more in the next section.
5. Maximize Business Value
There are only two ways to improve the value of your business: Reduce costs or increase revenue.
So, it is imperative that any business owner review their costs and revenue regularly to identify opportunities.
For example, taking time each month to ruthlessly review your P/L for expenses you can cut.
Any software you may be paying for but aren’t using, services you are paying for but not getting value from, and any overhead that is not necessary for running your business.
Your business sale price is calculated roughly as a 30x multiple of your monthly profit.
So, every $1000 you cut from your expenses will increase the value of your business by $30,000!
The other way to grow your business is by increasing revenue.
When you have clear finances to review, you can get clarity into what is working in your business and what to double down on.
For ecommerce businesses, this can mean identifying which SKUs and advertising campaigns are the most profitable so you can invest more into them to generate more revenue.
For service businesses, this can mean identifying which services and types of clients generate the most revenue/least hassle so you can pursue more of them.
With any monthly profit you can add to your business it will increase the sale value by 30x. So every bit adds up and leads to a business you can later sell for more money.
Set time aside to review your numbers and creatively think of ways you can grow your business. This will allow you to better identify ways to cut costs, increase revenue and build a more valuable business.
6. Exit (?)
Now you have built a profitable business in line with your vision, build the systems for the business to grow, got a great team to run it, on top of your finances and maximizing the value of your business. Congratulations this is an amazing accomplishment!!
At this point you have options..
You have fulfilled the two necessary requirements to sell your business: Complete finances and business not dependant on you to run.
But is selling your business the right thing for you to do?
For some it certainly is. But not everyone.
It’s hard to build a business!!
There are more options than you may think if you want to exit your business.
The first is a straight sale. This is a good option if you don’t see a bright future for your business (dying industry, margins going down etc). Or, if you have a new project you are excited about and just want the business off of your plate. Or, if you need the cash for something.
The other option is to hold your business. You’ve got a great team that is doing most of the heavy lifting. Can you build your organization in a way that allows you to do more of what you enjoy and less of what you don’t want to do? If you hold your business, you can also hire a CEO to replace you. This would allow you to continue owning your asset and elevate yourself to business owner or advisor vs being actively involved.
Sell or hold are the two options most talked about. But there is another option that IMO is very exciting. That is to sell part of your business.
If you need some money but know you have a great business selling a part of your business can be a great option. This will allow you to take some chips off of the table, get your cash, and still own a good portion of your business for the upside.
Further, if you sell part of your business, you can bring on investors/partners that have complimentary skills and experience to you. So they can add more value to grow the business in ways that you may not know how.
Resulting in a true 1 + 1 = 3 opportunity.
It’s even possible that you sell a part of your business and bring on value add investors that take the business to the next level. Within a short amount of time, the business grows past where you could take it personally, and now your partial ownership is worth more than your ownership when you too on the investors.
There really is no set rules on how these things are structured and you can get creative.
If this is an option you are interested in pursuing send us a message and we’d be happy to chat.
So there you have it! Follow these six steps. Set yourself up for a possible sale. Give yourself options. And crush the new year.