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passive ownership resized 600If you’ve thought about selling your business someone has likely told you that you need to keep your company ready to be sold at all times.  This is often referred to as sale ready. 

I believe that if you’re not thinking about selling your business in the near future having it sale ready is even more important.  Businesses that are always ready to be sold are more successful and tend to have better systems than private businesses that are just slugging along.

You will have made yourself into a passive owner.

The most important thing you will have done is you will have made yourself operationally irrelevant in your business.  Day-to-day operations will hum along just fine whether you’re around or not.

You’ve probably put together systems that allow others to deliver the type of service you want your customers to have.  These systems will help you have happier employees.  Your people will know what to do and know what you expect from them.

You will have developing recurring revenue.

Businesses that have a recurring revenue stream are easier to sell.  If you don’t have a recurring revenue stream, you will have developed a system for creating sales that several people in your company use.

When you create recurring revenue, you don’t have to worry about where your next sale is coming from.  Your cash flow will be more predictable.  You will be able to focus on other strategic issues that add value to your company.  This is more important when you keep your business than when you sell it.

You will have identified what your intellectual capital is.

Businesses that are ready to be sold know what their intellectual capital is.  They’ve learned how to communicate this to potential buyers.  It’s often what the difference is between a highly successful sale and one that is just so-so.

More importantly if you know what your intellectual capital is while you’re still running your business you know how to take advantage of it.  If you have a unique process for running your business you can expand on this process or put together strategic initiatives that take advantage of what you do.

Intellectual capital doesn’t show on your balance sheet.  It does show up in your cash flow.  The better you understand what drives success in your company, the more you can take advantage of this knowledge.

You will have identified a well-defined niche.

Companies that have a well-defined niche are rare.  Most companies will do business with whoever walks in the door.  Companies who take business from anyone have a higher cost of service than those companies that focus on what they do well.

A buyer will pay you for this focus, but you’ll benefit more while you run your business.  You and your staff will understand your customer and be able to provide your customers with service that is focused right in their sweet spots.  This allows you to provide better service with less effort.

You will have developed measurement systems that tell you what is really going on in your company.

Too many companies either don’t have good measurement systems or the systems they have don’t provide important information.  You will have told yourself the truth about your warts and have put improvement systems in place that document your real improvements.

Too many companies measure the wrong things.  They haven’t discovered the numbers that truly drive their business.  You’ll have done this and not only will it increase your value when you sell, but it’ll make you much more profitable today.  You and your staff will focus on areas that bring results, not ones that make you feel better.

These five things will provide big returns.  Start with making yourself a passive owner.  This will provide you with the time to pay attention to the other items in the list.  If you take time and spend the effort to keep your company in a sale ready position, it’ll pay big dividends today.

We’ve put together a special report on the 7 Steps to Leaving Your Business In Style.  This report will help you understand what you need to do to have your business in a sale ready position.  If you’re interested in getting this report, click on the button below.

Securities and Investment Advisory Services offered through NFP Securities, Inc. (NFPSI), Member FINRA/SIPC. Stage 2 Planning Partners and NFPSI are not affiliated.

This article is published for residents of the United States only.  Registered Representatives and Investment Adviser Representatives of NFP Securities, Inc. may only conduct business with residents of the states and jurisdictions in which they are properly registered.  Therefore, a response to a request for information may be delayed.  Not all of the products and services referenced on this site are available in every state and through every representative or advisor listed.

Topics: value creation, transition planning, exit readiness

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