A Business For Sale is More Valuable When the Owner is Replaceable

A Business For Sale is More Valuable When the Owner is Replaceable

Most potential buyers would be averse to purchasing a business if the owner's shoes are too big to fill or if the owner's hand would be too difficult to unravel from the operation. When preparing to sell or build value in a business, the owner should not be so involved in the business that it would be difficult for would-be buyers to see the business as being productive under new ownership. Buyers want the owner to be replaceable.

A business is more valuable when perceived risk is low. A business is less risky when it is making money without its owner's involvement in daily operations. Three things about value:

• Value is dependent on risk
• Value is not about what the business is worth in the current owner's hands, but in someone else's.
• The more dependent the business is on its owner, the higher its risk, and the lower its value.

Therefore, to achieve a higher value, it is important to have systems running the business and an experienced staff running those systems. An enterprise with infrastructure guiding its revenue-generating capacity is much more appealing than one with a singular person holding the key to the revenue engine. The owner should be free to work "On" the business instead of "In" the business.

Systems and Procedures

Documentation of standard policies, employee records, systems, procedures and controls demonstrate that the business can be maintained profitably after the sale. Business systems include the computerized and manual procedures used in the business to generate its revenue and control expenses. It outlines the methods used to track how customers are identified and how products or services are delivered. The following are examples of business systems that enhance business value.

• Personnel recruitment, training and retention
• Human resource management (an employee manual)
• New customer identification, solicitation, and acquisition
• Product or service development and improvement
• Inventory and fixed asset control
• Product or service quality control
• Customer, vendor and employee communication
• Selection and maintenance of vendor relationships
• Business performance reports for management

Staff 

Buyers count on taking over a business with an in-place staff that can provide continuity and assist in the growth of the business. If a company’s success is reliant on capable, well-trained employees – not the owner – it means the business will not be negatively impacted under new ownership.

This is an excerpt from one of our business listings currently on the market that is a prime example of the replaceable owner.

"This well-reputed firm has long-term expert personnel, technicians, an office manager, and a bookkeeper that run daily office operations leaving an energetic new owner free to market, network, and build additional recurring revenue streams onto what has already been established in this fine enterprise."

  Written by Certified Business Brokers (CBB)




For a complimentary consultation: 
Contact  Cecil Williams (cecil@bizbrokerflorida.com) or call  at 888-925-5055 ext.206.  Visit my personal website to search for business for sale in Florida www.bizbrokerflorida.com  Also, visit our Florida Business Exchange website at www.fbxbrokers.com