Updated: Nov 6, 2019
Have you ever placed a car you own up for sale? What is the first thing you do? You clean it up. You fix the things that need it. You get the french fries out from between the seats. You get the car ready to present to someone else with the hope that it will attract top dollar. It’s natural for us to do this. We are trying to get the most out of our car.
A curious thing happens right after you clean up your old vehicle. Especially, if you are still driving it daily. You get behind the wheel. You like the way it rides better, smells better, looks better, etc. You even start to think, “This is a pretty nice car.” All of the issues that made you ready to sell have suddenly disappeared. What a bonus! You get the benefit of riding in a “pretty nice car” throughout the entire period that it sits on the market. In the end, you get an offer that makes you happy. In the meantime, you received the benefit of a car that was providing the operator with great value.
The point of that analogy is to present this opinion. Run your small business like you’re trying to sell it; even if you have no current plans to put it on the market. Much like putting a car on the market, your business will feel the same way. You will feel a new energy about your business, and reap the benefit of the profit and cash a healthy business produces. If you want to attract top dollar from a buyer when you intend to sell, show them that your business is clean and serviceable.
When I say clean, I literally mean clean. First impressions are critical to getting a buyer to look a little closer at your operation. If you have been in business for a while, you might look around your business and see little messes that have accumulated. Clean up projects that you set aside as a low priority; they can clutter the work space or look like an eyesore. In a recent consulting engagement, this area was the indoor/outdoor warehouse. When I pulled up to the front door of the business, I parked in a gravel lot surrounded by piles of seemingly unorganized items. Not small piles. Piles taller than my vehicle and compiled much like the heaps you would imagine to be in a junkyard. To a potential buyer, this first impression is one that screams, “This business needs a lot of work.”
Take the time to clean up the little messes that have accumulated around your workplace. You might be surprised to find that the mood of the workforce will improve, leading to a boost in productivity. People love to work in a clean environment. It is one that they can be proud of and feel good about driving to each morning. It could be a big task up front, but easily maintained after you get it done. Make this your first priority, just like you would wash and clean your vehicle.
The second and possibly more difficult task is to fix the issues that are contributing to your operation being less than optimal. If you don’t know where to start, start by comparing your financial operation to those of companies in a similar industry. Your goal is to operate better than the average company. Look specifically at how much gross and net profit they have compared to yours. This is the report card for how efficient your operation is. Potential buyers like to buy the cash flow your company is producing without a lot of effort. This is a similar goal of the person wanting to buy your used car. They want the immediate satisfaction of driving the car without the effort of having to fix it.
Once you spiff up your business, you get the immediate benefit that any buyer would have. You benefit from the profit the business produces every year before you decide to sell. Once you decide to sell, a buyer will reward you again with an above market offer. Why? Buyers love to acquire companies that can instantly provide them with value. The better your company operates, the lower the risk a potential buyer has. Whether it’s your business or your used car, buyers just want to jump in the driver’s seat and go. Make it easy for them to take the wheel and you will both be happy.