So recently Melissa and I purchased a new home. Melissa built our current property 16 years back, with a little help from the builder of course. We’ve been discussing getting a place that’s truly ours for a while but have been waiting for the right time. Whilst ‘window shopping’ back in January, we found a place we liked… So much for window shopping.
After a month of negotiations, we managed to agree with the builder and so now are looking forward to moving in. Before that however… We need to sell our home. So what’s that got to do with building a business I hear you ask? AND are you ever going to tell us about entrepreneurialism? Well yes, of course.
When selling your anything, you aim to get a good price, maybe not the absolute best price, but the best price you can for the effort you’re prepared to put in. Right?
Well, same goes with your business. Similarly, if you have years of neglect of course you will be struggling to make it look good for potential buyers, makes sense right?
Now let’s say that right from the outset, you bought your home as an asset, not a dwelling. It’s not a silly idea, to most people their home is their greatest asset. If your focus was this, of course you’d do what you could to maximise the value. When considering renovations or improvements, your first thoughts would be, how will this affect the sale price?
Most of us, when thinking about changes to our home, have this as a consideration… just maybe not our primary concern. We’re concerned about the lifestyle, the cost and affordability of what we’re considering and only after these do we think (and maybe we don’t) of the impact of the project on the eventual return on investment of the renovations.
Imagine You Knew You would Sell Your House in 5 Years
How would this change your thought process?
Of course you still have to live in it, yet now as you look to modify the home, you have another consideration. Is this renovation, extension, improvement going to provide a return?
Your focus is likely to change. You’re more likely to start considering what a potential buyer may be seeking as well as how the improvement fits your lifestyle. After all, you want to get a great price for the home.
I doubt you’d put the sale to the back of your mind and plan just a quick ‘freshen up’ in the last 90 days. Some may…
Others would start planning, maybe even some research, what would yield the best return on investment? Kitchens and bathrooms are always a big selling point and knowing this, they may not want to do them too early as trends do change, yet there is the element of… “If we’re going to all this effort, we should enjoy the benefits ourselves too.” So maybe these come into a plan a couple of years out from sale and of course a suitable budget would be set. One that recognises the appropriate rate of return and careful not to overcapitalise.
A new light would be cast on all the renovations you were considering. Remodelling the place, maybe lifting it, or extending… All of a sudden, it becomes a matter of what would get you the best yield.
In fact the budgets for renovations, for freshening, even the landscaping and gardens would all come back to a combination of lifestyle and return on investment, yes?
Now About Your Business… What if you knew that 5 years was the deadline?
Many business owners I talk to haven’t considered this, well not before they’re about 50. Then all of a sudden, things change…
The prospect of a sale in 5-10 years takes on a whole new meaning. “What would I need to do to get the best return in 5 years’ time?” It’s a more real question for them.
Isn’t it the same as the house? A combination of lifestyle and return?
Often when starting a business freedom is a big drawcard.
What’s Freedom to you?
Freedom, one of the least understood and appreciated things in the world. To some it’s a time when they can do whatever they want, whenever they want with whomever they want. Others feel that’s anarchy…
Freedom, however you express it involves the ability to do things on your terms. As teenagers we’ll often enter a phase of rebellion and decide that although we’re happy to do what our parents ask, we’ll do it on our terms, when we’re ready, and to the level of our satisfaction.
When we’re in business, freedom takes on a whole new meaning… one well discuss later…
Selling Your Business!!!
Who sets the price?
The purchaser, of course we can ask whatever we want, but it is only worth what someone else, anyone else will pay. If we ask too much, we simply don’t get a sale.
Of course we’ll start researching what buyers want… I was discussing this with a Business Broker recently… Strangely buyers don’t care much how much effort or, how many hours you have put into the business in the past, nor do they tend to care for kitchens and bathrooms…
They told me business buyers are seeking predictability of future income. AND the level of effort required to create that predictability. Since the point of selling is for you to exit the business, guess what… they want to understand what the business will earn without you!
So if you were to, take you out of your business, how would it perform? That’s their critical question. That’s what they’ll pay for.
Imagine for a minute, employing a qualified professional in the field, on a fair income, how well could they run your business with the systems and processes you have created? Does the business bring in customers through those systems and processes? Does it make a profit? Or, is the business reliant on you?
If your business relies completely on you… You may not have an asset to sell!!!
Having said that, we have 5 years… So you can built it…
The 5th Step
We discussed earlier about building the team (tribe) From Survival to Entrepreneurialism , and then about moving from survival to control, and a couple of weeks back we discussed taking the business from control to scalability.
Each step is a process. And like a video game, we can’t play level 4 until we’ve conquered level 3 and 2 and 1. We cannot create a scalable business until we have strong systems and processes. We can’t trust our systems and processes unless we have a strong culture.
So after we’ve 1. Identified our desired outcome, 2. Created the culture, 3. Created the systems and 4. Developed the systems to a scalable platform, our business is ready for sale.
The 5th step is in fact developing the process of creating a scalable business. The process of remaining socially aware of the results we achieve and taking the appropriate steps to continually improve our business through refining our effectiveness and our efficiency in delivering whatever it is we do for our clients.
How we may help!
Our Business Mojo programs do just that. Help you build your business by helping you take it to the next level, the next step and onto helping you create a scalable and ultimately saleable business. If you’re interested in finding out more about where your business is at, and how you can create the asset you desire to sell in the future, contact me on 07 3121 3272 or email Kevin@growthmentors.com.au to organise a FREE 30 minute assessment session that will provide you with greater clarity of where your business is at and the process to take it to the next level.