You don’t start a business overnight, and you don’t leave one that way either. You may be ready to move on – but is your business? Many times, owners hold a lot of loose ends in their hands; if they step back, chaos can ensue. A well-groomed business has those ends tied up before potential buyers come into the picture. What does the process entail? How long does it take? And, if you are leaving your business, why bother with it at all?
What is business grooming?
The concept is simple: you might groom yourself to get ready to go out with someone new. The object is to make yourself more attractive, to show off your positive attributes. The object of grooming a business is to make it attractive to potential buyers. It involves cleaning up balance sheets, maximizing cash flow, shoring up relationships with customers and suppliers, and other steps that will result in a stronger, more saleable business.
Grooming, like a good haircut, is designed to make your business look its best. It’s not plastic surgery; you are not making who you are and what you do unrecognizable, you are putting your best foot forward.
How long does it take?
Grooming often involves substantive changes in your business, but here’s the catch. It cannot seem to involve substantive changes in your business. Sudden changes can cause panic or distrust in customers, employees and vendors. Grooming is a gradual process. Changes, whether increasing sales, building up a diverse customer base, or implementing a more efficient accounting system, need to be implemented in a slow and well thought out manner so you can create continuity and stability within the company and its stakeholders.
You have to clean up business affairs, increase value, and, of course, find a buyer to complete a sale. This may take a few years to do, so it is best to start planning an exit strategy as soon as possible.
Peter Christman, founder of the Exit Planning Institute, estimates that as many as 75 percent of business owners do not have an exit plan. They put themselves at risk, or at least, they prevent themselves from capitalizing on the sale. If you have properly groomed your business, you do not have to grab at offers that are less than favorable; you can ask a higher price because you have increased the business’s value and reduced risk for potential buyers; you are in a position to attract “higher-quality” buyers.
But there’s another reason: this business that you own will continue after you step away. When you have worked to groom it, you have done your best to ensure that it has the opportunity to grow and thrive under new ownership. Entrepreneurs who put their hearts and souls into their businesses may find that comforting. And if they don’t, they can comfort themselves with the higher asking price.