When you ask business owners why they started their company, you frequently hear these words: Freedom and opportunity.
Opportunity tends to have a narrow definition. Someone sees potential in a market and goes after it. Opportunity may also mean the ability to make more than they could make at a job.
Freedom’s meaning seems to vary a bit more from owner to owner, at least as it relates to “I started my business because I wanted more freedom“. Knowing exactly what it means to you is critical. Those specifics will impact on how your company takes shape, how it’s run and eventually, how it appears to potential buyers.
I bring this up because I’ve recently been in a number of conversations with owners who are planning or considering the sale of their business. Some haven’t made the “I want to sell” decision yet. Those who haven’t decided yet are still focused on improving their business practices. These changes will make their businesses more attractive to potential buyers if and when that time comes.
Working toward a better freedom
When discussing what needs to be done to sell your company, there’s usually a long list of things that the owner wants to improve before looking for buyers. Since your company will benefit from a subset of these improvements even if you don’t sell the company, be sure to focus on those things first.
First – Anything that makes the company better also improves it for you between now and the time you do close a deal. If you never close a deal, you still benefit.
Second – Some of the things you’d to prepare will only benefit you in situations where an “investor-class” buyer is involved, such as a private equity group.
Selling your business to “someone in your town” is much different than selling it to investors. The more sophisticated the buyer, the more complicated, annoying, and costly the due diligence process will be. Be sure that the prospect is dead serious before venturing into this process because it won’t be fun, cheap or easy – and it’s possible their intentions won’t be honorable. Doing your homework is essential.
How does this relate to freedom? The improvements you make should improve the freedom your business provides – and these things are almost always the same things that make the business more attractive to buyers.
What does freedom mean to you?
Specifically, what freedom does your business provide – or what freedom do you want it to provide?
Whether you are looking at what happens after you sell your business, or simply what will happen once your business reaches the point of being able to support you – it’s critical that you know exactly where you want it to take you.
Does freedom mean more time? What’s that mean for you?
Working fewer hours than at your last job? Working at home vs. having to commute? Being home every weekend? Not having to travel 25-30 weeks per year? Having the ability to come and go at will? Having a more flexible schedule day to day than at your last 8-5 job?
Knowing up front exactly what time freedom means to you will help you design the business to provide it.
Businesses that provide time freedom typically have a team doing the day to day work. At first, the owner might be managing the team. Over time, owners need to recruit and/or develop someone to manage their team.
Companies structured like this can be easier to sell because they aren’t as dependent on the owner to run them day to day, much less to create revenue. They also provide smoother continuity if the owner dies or is disabled.
Does freedom mean more money? What’s that mean for you?
Does it mean that your income is more secure? More resilient? More diverse? Less likely to be at the whim of someone else?
What aspects of the business protect that income, your pipeline, etc? How resilient is that income if you have to interrupt your work (as owner) to care for a family member for more than a day or two?
Companies where income freedom is more important than time freedom can be harder to sell if the owner is critical to day to day operations.
Either way, the important thing is knowing what you want & structuring your business to support that over the long term.
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