You have made a big decision. You are going to start your own business!
There is a lot of attention given to the start-up phase of becoming an entrepreneur but I would like to provide you with lessons I learned after my business was successful and I wanted to sell my business. By applying these lessons now, while you are in the start-up phase, I hope you can benefit from my experience and save yourself a great deal of time and future frustration.
If I was to do it all over again this is how I would do it!
Building a business is very much like building a house. Every house needs a good foundation and so does your business. As the founder(s) of your company, you the individual(s) are the foundation. Therefore if your business is going to be built on a strong foundation you must develop yourself into a strong individual(s).
Another aspect for you to consider when building the foundation for your new business is to understand the WHY behind your business. This is closely linked to who you are as a person. Please read Simon Sinek’s book Start with Why. Simon does an amazing job explaining the reasons that applying what he calls the golden circle in your business is so essential.
Start With Why, End With the Start
Once you have a clear understanding of why your company exists you need to turn your attention toward the end result.
What are you trying to accomplish with your business? Are you building a legacy business you will pass on to your children or are you building a business that you are going to sell?
The time to answer these questions is now at the beginning of your entrepreneurial journey, not at some unclear time in the future. The decisions you make in the start-up phase will be greatly impacted by what you are ultimately trying to accomplish in the end.
Business Plan Plus Action Equals Success
A solid business plan is an essential tool on the entrepreneurial journey.
“An average person who develops the habit of setting clear priorities and getting important tasks completed quickly will run circles around a genius who talks a lot and makes wonderful plans but gets very little done.” – Brian Tracy
That being said a plan is nothing without people in place who take consistent daily action. Don’t get into the trap of endlessly planning. Make a business plan that is realistic with conservative projections. Do your research and understand your market and industry. Then take action!
“No plan survives contact with the enemy”. – Helmuth von Moltke
This military expression really captures the reality of what all business plans encounter. You are going to have problems, unexpected reactions from competitors and unforeseen challenges. Expect them and you won’t be completely taken by surprise when they happen. Adjust your plan as you get new information and keep taking action.
A Business with Customers
If you ask any venture capitalist or angel investor they will tell you that they have never seen a business plan that does not show projections of profitability. Yet 80% of businesses fail in the first five years and 96% of businesses fail within 10 years. Clearly, a business plan that shows profitability is not enough.
Your business no matter how revolutionary, altruistic, or well planned out will not succeed without enough customers to reach profitability. This may seem like just common sense but as Voltaire and Mark Twain are both credited with saying “common sense is not so common”.
Many people have great ideas but those ideas must resonate with customers and move them to spend money. Without this fundamental, in place, you should not proceed with your entrepreneurial journey. Think long term, how will you make your business worth selling without a large enough market to be profitable?
Systems and the Franchise Model
If you want to build a business that you can sell you must build a business that operates profitably without your involvement in day-to-day operations. To do that you need to create systems that produce predictable results.
Once you accomplish this with the first position or process in your company you will be starting a process of freeing yourself up to do more and more of the strategic work and less and less of the technical work that your business performs for its customers. Eventually, you will be able to completely exit your business and it will run predictably and profitably. At this point, you have something to sell.
For me the franchise model allowed me to move 1000 kilometers away to be closer to my family while continuing to operate my business successfully. To learn about the concept of systemization and how to implement the franchise model in your business please read the E-Myth by Michael Gerber.
How Do You Know When It Is Time To Sell?
Achieving the goal of implementing the franchise model in your business is not necessarily the right time to sell your business. After spending so many years building your business you should take some time to enjoy the fruits of your labor. Let your business run and make you money while you enjoy a mini-retirement. (If this idea appeals to you please read Tim Ferriss book The 4-Hour Work Week)
It is also very important that you have all of your financials in order prior to selling your business. Remember as the seller you will be at odds with the buyer. You want to sell high, they want to buy low. Get professional accountants that have a background in mergers and acquisitions to help you prepare.
For me, the time to sell came when a long-time business associate who owned a business in the same industry and I came together. We had discussed the possibility of merging our businesses several times over the years and this time I knew it was the right time to sell. My business was sold to someone who would take care of it, build upon the foundation of what I had started, and take care of my employees and customers. Most importantly my business was sold to someone who was willing to give me a great price on excellent terms.
It is my sincere hope that this article has provided you with the basic framework to build a business you can sell. Thank you for reading this article, please share it with your social network, follow the blog so you don’t miss new articles, and feel free to comment as well. You can contact me by going to the Contact Page.