Having a sellable business provides flexibility and options for the owner, allowing them to transition to new opportunities or life changes without being tied to the business indefinitely.
What is the first component of a sellable business?
The first component is growth potential, which refers to the capacity and opportunity for the business to expand its revenue and serve a larger market.
Why does growth potential matter to buyers?
Buyers want to see that there is potential for future growth and that the business has not fully tapped into its opportunities, reducing risk and increasing appeal.
When is the best time to sell a business?
The best time to sell a business is often when it is thriving and growing, as buyers are more likely to see potential and offer better terms.
What should you do if your business is in pain?
Instead of selling, focus on solving the pain points by improving leadership, processes, or other areas of weakness to strengthen the business before considering a sale.
What are the three buckets of growth potential?
The three buckets of growth potential are expanding to new markets (e.g., franchises or international markets), developing new products or technology, and exploring new customer segments.
What is a unique value proposition?
A unique value proposition is the distinct benefits a product or service offers, which can be in terms of product quality, pricing, or marketing strategies that differentiate it from competitors.
Why is a unique value proposition important for selling a business?
A unique value proposition mitigates risk for buyers by making the business less vulnerable to competition and more attractive as an investment.
What is diversification of revenue?
Diversification of revenue means generating income from multiple sources, such as different products, services, or customer segments, reducing reliance on a single revenue stream.
Why is diversification of revenue important to buyers?
Diversification reduces risk, as the business is less likely to suffer significant losses if one revenue stream declines or disappears.
What is cash flow and why is it important?
Cash flow is the money moving in and out of a business. Positive cash flow is crucial for buyers because it ensures the business can sustain itself and grow without requiring additional investment.
What are the two main reasons for weak cash flow?
Weak cash flow can result from mismanaged resources, such as overspending, or low product market fit, where the business cannot demand higher prices due to lack of demand.
What is recurring revenue and why is it valuable?
Recurring revenue is predictable income from subscriptions, long-term contracts, or maintenance fees. It provides stability and predictability, making the business more attractive to buyers.
What are the two key measures of financial performance?
The two key measures are revenue, which indicates the business's ability to sell, and gross and profit margins, which show how efficiently the business generates and retains profit.
Why is a strong team important for selling a business?
A strong team ensures the business can function independently of the founder, making it more attractive to buyers as a stable and self-sustaining investment.
This chapter emphasizes the importance of growth potential in a sellable business. It highlights the need for demonstrating future growth opportunities to potential buyers and warns against selling a business during a time of struggle.
Growth potential is the capacity for revenue expansion.
Buyers seek businesses with untapped potential.
The best time to sell is often when the business is thriving.
Lack of vision, not potential, often limits growth.
Welcome to Build where we talk about the lessons I have learned in scaling big businesses, gaining millions in sales, and helping our portfolio companies do the same. Buckle up, because we’re creating an unshakeable business.