Your business may be operating smoothly now, but if you’re entertaining the thought of selling you need to see it through the eyes of a potential buyer.
Two things that trip up plenty of successful businesses include customer concentration issues and the owner’s role in the business.
Customer concentration issues
This is a common problem with the potential to sink the value of your business no matter what your adjusted EBITDA is, and for good reason. Any buyer interested in your business will instantly recognize concentration issues as a great risk.
This is putting all your eggs in one basket. If the majority of your work is done for a single client, you’re gambling the future of your entire business on their performance and/or their reliance upon you. If you make widgets for Company Inc. and they go under or find a widget seller they like better, your entire operation can come crashing down.
Bringing in more business with more diverse customers relieves your dependence on any single client. So if Company Inc. goes away but only represents 20% of your business, your company survives.
The Almighty Owner
The second issue that commonly deflects potential buyers is you. Consider your role in your company carefully. If you leave, does your management team have the knowledge and experience to keep things running smoothly, or will operations grind to a halt? If your role is central to the success of your business, a potential buyer is going to have to bring in and train an entire management team. They’re going to need you to stick around during a very long, slow transition just to keep things going.
Make sure you have a good team in place, one made up of the right people in the right roles, who can run the business on their own.
Will your business be ready when it's time to transition?
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