Minimizing involvement is key to selling a business

3/2/2011

One of the ultimate goals for most small business is to eventually sell their companies. To accomplish this goal, they try to build teams of skilled employees, develop a list of high-value clients and generate large profit margins.

However, as Inc. magazine recently observed, this doesn't always translate to a higher selling price. Potential buyers want to know the company will continue to be successful in the future. After all, previous profits matter little if the business tanks once the purchaser has acquired it.

"Acquirers pay most for businesses whose future is guaranteed in the form of long-term contracts," explains the source. "After contracts, they will look at your recurring-revenue stream and model out what kind of revenue they can expect based on how frequently your customers have repurchased in the past."

With this in mind, entrepreneurs need to work on developing a solid business plan that can be carried out even without them at the helm of their companies. By minimizing their direct involvement, they can set their businesses up for future profitability, maximizing their value to potential acquirers.