Although we enjoy the romantic notion that there’s some wholesome businesses out there being built specifically for the founders to pass on to their children decades down the line, it’s a pretty outdated notion, not to mention risky; what if your kids are simply not business minded, or worse, lazy? Choosing to put their faith in making money instead of gambling on a good gene pool, there are thousands of entrepreneurs who build businesses to sell for a profit. It’s an established model: establish a niche, create a thriving enterprise, sell up and move on. Or better still, sell up and buy a deserted island with your best buddies where you can establish a new world order and live happily ever after.
Anyway, we digress… All about starting from the conclusion and working your way back to the humble beginnings of your company, it’s a solid idea to build your business in line with the fully formed and seamlessly functioning company that you’d like it to be should you ever wish to sell it. Even if, right now at least, you have no desire to sell it. Building a succession plan into your business will help you stay on track for growth and keep your eye on every founder’s ultimate prize — being able to run the business without having to work so hard in the business.
A good start is to map out your organisation; just like a family tree shows the branches from which your relatives stem, your business’s organisational chart is a visual map detailing the structure of your business, both how it looks now and how you would like it to look once the company is fully fledged. Underneath the managing director, for example, might sit your marketing, finance, operations and HR directors, below them their managers, supervisors and team leaders, and assisting them their team members and assistants. Not only is it incredibly encouraging to sit back and look at how much you’ve already achieved by filling the positions that are already up and running, it’s equally motivating to see that you’re working towards the next stage of your hiring plans and working out collaboratively how to make that happen.
As you begin to achieve the growth you’re hoping to (which you should always believe you will — positivity is as essential as passion), the exact definition of all of the roles that make up your business will become increasingly more important. Clear roles and responsibilities are essential to ensure the buck stops with the right person; when two people could be responsible for one task it’s possible that both think the other person is doing it and that it won’t get done at all — and no one needs that. Make sure everyone knows what they’re responsible for and who they’re accountable too, and make sure all this role profile info is documented clearly somewhere accessible, so everyone knows what’s what.
Just as businesses with a clear structure are an attractive prospect when floated on the market, companies that kick goal-setting ass are any investor’s dream. That is a fact. ‘We will make a billion pounds during the next financial year’ is not a fact, it is a (wildly unrealistic) statement.
Another fact: the difference between statements and goals is what the successful growth of your company rests on. Where short-, mid- and long-term goals are steppingstones to an end result which should be a part of your business’s day-to-day operations, statements are overblown and often unattainable dreams that aren’t anchored to procedures put in place to make they happen. As well as keeping you accountable and providing direction, goals are a sure-fire way to stay motivated, track your progress (who doesn’t love ticking their do’s off their to-do list?) and work out what you really want.
Make sure every goal you set is SMART: Specific, Measurable, Attainable, Relevant and Time-Constrained. For example, your goal is ‘I want to grow my business’. It’s all very well saying you want to ‘get some new business on board’, but it’s also pie in the sky; what business owner doesn’t want to generate more clients? Made SMART, your goal now shapes up like this:
Specific: I will take on three new clients.
Measurable: I will measure my progress by how many new clients I bring on while successfully maintaining my current client base.
Attainable: I will ask my current clients for referrals, launch a social media marketing campaign targeted towards those clients I want to attract, and organise a networking event with other local businesses.
Relevant: Adding new clients to my books will support the ongoing growth of my business and increase my revenue as it grows.
Time-Based: I will have three new clients within three months.
You also need to be prepared to change and adapt as your industry and personal aspirations naturally will. It sounds a little cliché, but it’s true — what got you here won’t get you there. You have to be prepared to make changes as you grow, which isn’t easy when your business is like a baby that you’ve nurtured to adolescence but is absolutely necessary if you want it to grow that slightly gawky, awkward teenager into a confident and self-sufficient grown up. Actions speak louder than words here, so if there’s a specific goal that you set every year but never achieve let alone make a dent in, it’s time to step back and double check you’re still headed in the direction that’s right for you now.
Back to the serious bones of becoming a saleable business, and we cannot stress this enough – get your finances straight. To be honest, this topic is an entire blog in itself. Getting your head around everything financial isn’t most people’s favourite part of running a business (plus, it’s all too easy to fixate on profit alone when you’re thinking about how much business you’ll need to generate in order to reach the dizzy heights of what you’ve deemed successful), but it’s absolutely necessary so get used to the idea. Pronto. This isn’t just about understanding your true break-even point and having a vague idea of what means what on your profit and loss, it’s about knowing your numbers and then consistently comparing your historic financial data over a range of different timeframes to track everything from revenue growth and expenses to any slippages that might have occurred.
Work on your cashflow. And then work on it some more. Outwardly, you might appear to be the most admired business on the block, radiating an image of massive success as you walk down the high street with pound signs bouncing off your aura, but if you’re not in control of your cashflow (a typical time period for cashflow projection is 12 months, FYI, but you should work on it weekly) you are at risk of losing it all at any given moment. It’s make or break stuff, so if you don’t have anything in the cashflow for a laptop, for instance, you shouldn’t be thinking about buying one.
Make sure you’re consistently realistic with your numbers. We’ve all seen it on Dragon’s Den – an entrepreneur with the world’s most confident demeanour, oozing personality rocks up to the panel with not a bead of sweat on their composed brow, delivers a belting idea and then turns into a gibbering wreck the minute the words ‘financial forecast’ are thrown at them. It’s utterly mad how many business owners don’t have their head around their numbers and even more crazy that those who do don’t then look over them regularly enough. As business owners, it’s great to create a cashflow that has ambitious sales goals and sets you off on a day-dreamy path of mentally listing everything you’re going to do with your £250k salary in a couple of years’ time, but let’s be real here, that rarely happens quickly if at all, so it’s imperative you make sure that your revenue and hiring goals are sensible and achievable, and that you revisit them regularly to keep focused.
After you’ve crunched all the numbers, it all comes back to being realistic; is your current plan – when compared over time – on the right track, or do you need to up your prices, cut back some costs or both? When you know exactly how much you need to make and what you need to tweak to get there, it’s far easier to set long-term, sustainable goals and to answer any questions about how you’ve got to where you are now to prospective buyers in the future.
Keeping on top of your business processes is not quite as important as knowing the difference between cash and profit (seriously, you’d be surprised how many don’t), but it’s an essential piece of kit in the overall package that will strengthen the sale of your business.
When someone’s off sick, which sometimes they will be, yes, it can cause momentary inconvenience, but should also be something that’s easily sorted by a colleague picking up the slack by following the business processes that you’ve ensured are in place.
It’s all about creating a business that works for you and your team holistically, where systems run the business and people run the systems. And truth be told, there’s nothing remotely mysterious about these hallowed systems at all; all they are is a series of clear processes that explain and/or determine how to carry out certain tasks that can be understood and promptly undertaken by a colleague.
Think the processes you have in place now are all running like clockwork? Perhaps they’re working well, but there is often always room to improve your systems so that when the working day starts you can get straight into some meaty, satisfying tasks instead of spending your day putting out fires.
Annoyingly, it’s human nature to complicate even the simplest of tasks, so it’s a great idea to carry out an inventory of your business processes, rank them from the most to least important, break them down so that anyone needing to pick up where someone left off can see a clear beginning, middle and end, and don’t forget to ask for feedback. Not only does this help to keep track of how smoothly existing processes are running and whether any need updating, but it increases trust and happiness among employees who feel reassured that their opinions are valid – no company can run successfully without considered effort from its employees, so it’s best to keep them sweet.
Finally, always think about when the right time might be to sell – even if you’re not sure you want to sell at all, or if the prospect seems far off, sometimes it just won’t make sense to consider it. There are all sorts of things that can come up during the running of a business – personal relationship issues, falling on hard times financially, your interest suddenly getting sparked by a new project you need cash for, buying a house, attempting to raise teenagers (they’re so fascinating and yet so weird, aren’t they?)…
Because real life happens alongside your business life, it’s helpful to remind yourself when you get the urge to move on that it might not be the best time. If it is, congrats – we hope you make loads of money and live happily ever after on that blissful deserted island.