Most entrepreneurs start a business without much thought about how they will end it.   They also tend to build a business around their technical skill – hairdressers open hair salons; builders start construction companies, and chefs open restaurants. The trouble is, these technicians get so involved in ‘doing the work’ that they don’t stop to think about what they really want from the business, or what they want the business to do for them, explains business strategist, Kobi Simmat, author of How to Build a Business Others Want to Buy.

Fast forward five, ten or fifteen years, and the business owner starts to think, ’I’m tired and a bit bored. I wouldn’t mind moving on or doing something different. Maybe I should sell the business?’  They then work backwards to find out what they should have done at the start.

Here’s a thought. Why not start with the end in mind and act as if you’re going to sell the business from the minute you begin it. If you do, I can assure you that you’ll do things very differently and you will end up with a much more valuable asset in half the time.

I didn’t do this.  I started my business when I was 29 years old and wasted ten years working out what I wanted the business to do for me and why I was in business. Now I know differently, and I want to share that hard-won wisdom with you so you can get to where you’re going more quickly.

If you want to build a business others want to buy, you need to get educated now about what a buyer looks for when assessing a potential acquisition.  Getting this right now will enable you to sell the business for a much higher fee later on.

Here are the top 3 things I wish I knew about selling a business when  starting out:

Understand the metrics

It pays to get familiar with the metrics that will be used to assess the success of your business.  Try to find out what your potential buyer might need.  Is it profit? The number of users? Revenue? Number of free trials signed up?   Here are the top 10 growth metrics that give buyers a holistic picture of how successful you are now, and how likely you are to be successful in the future:

1. Net profit
2. Asset Turnover
3. Strike rate
4. Annual contract value
5. Monthly recurring revenue/subscriptions
6. Average revenue per customer
7. Customer churn
8. Churn rate
9. Customer retention rate
10. Customer acquisition cost

Buyers of a business look carefully at these metrics because they not only shine the light on the current performance and efficiencies of the business, but they also help them identify areas for improvement once they take ownership.

Aim to own

Outsourced businesses are less valuable to buyers.  I work with many contractors and freelancers but without permanent, loyal and trained staff, you don’t have a business, you have a concept.  This desire to ‘own’ extends to buildings, equipment, cars and electronics. I don’t like renting anything. I’d rather own it outright. It gives me a sense of security and stability and sends a signal to others (and my subconscious) that ‘I am in this, boots and all.  I am here to stay.’

Subscription-ify your business

There’s a reason Atlassian and Xero are valuable companies.  They all have a monthly subscription revenue (MSR) business model.  Your car insurance, health insurance and gym membership are all examples of MSR, which is one of the most attractive business models buyers look for.

Almost anything can be subscription-ified; accounting, lawn mowing, dog grooming, socks, shavers, toilet paper.  Business buyers love this model for a few reasons. It delivers immediate cash flow; it reduces paperwork as the client signs once and the amount gets debited each month; it minimises the sales process as existing clients don’t need to be reminded to buy.

It took me ten years to realise I was building my business in the wrong way and then another ten to turn it around to make it a sellable asset.  Don’t do what I did. Apply these three strategies now and you’ll be well on your way to building a business others want to buy.

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