As a business owner, you may have dreams of scaling your business to new heights. You might also be considering the possibility of selling your business in the future, whether to retire, pursue other opportunities, or simply cash out on your hard work. But have you ever considered how growth and sellability are intertwined? Achieving sustainable growth is often the key to creating a business that is not only profitable but also appealing to potential buyers when the time comes to exit. In this blog, we’ll explore why growth and sellability go hand in hand and how focusing on both can maximize your business’s value and long-term success.
1. Growth Makes Your Business More Attractive to Buyers
When you’re looking to sell your business, the number one factor potential buyers will assess is whether your business is growing or has the potential for future growth. A stagnant or shrinking business is far less appealing than one with a solid track record of growth or clear plans for expansion.
Why It Matters:
- Sustainable revenue streams: A growing business often has more diverse and stable revenue streams, making it more valuable to buyers. Buyers are looking for businesses with consistent sales and profits, as well as the potential to maintain or increase those numbers post-sale.
- Proven market demand: If your business is growing, it shows there’s market demand for your product or service. This provides reassurance to buyers that there’s a strong customer base, and the business is positioned for continued success.
By focusing on growth, you’re essentially building a business that will appeal to a wider range of buyers who are looking for an investment with long-term potential.
2. A Growing Business Has Scalable Systems
As your business grows, you’ll need to develop scalable systems and processes to support the increased demand. This is an essential step in creating a business that is easy to operate and manage—whether you’re at the helm or someone else is.
Why It Matters:
- Operational efficiency: Scalable systems streamline day-to-day operations and make it easier to manage growth. Whether it’s automation software, employee training programs, or inventory management systems, these tools reduce the need for constant intervention and make it easier to maintain consistent quality and performance.
- Appeal to buyers: Buyers are looking for businesses that they can take over and run smoothly. If your business has the right systems in place, it shows that the operations can run efficiently without requiring a significant amount of your time and energy. This makes the business more attractive to potential buyers who are looking for a business that can operate without being overly dependent on the current owner.
Building scalable systems not only supports growth but also increases the salability of your business by making it easier to transfer ownership.
3. A Business That Grows Demonstrates a Strong Brand and Customer Loyalty
Growth often goes hand in hand with increased brand recognition and customer loyalty. As your business expands, you’ll naturally attract more customers, and those customers will become more loyal if you’re providing a consistently excellent product or service.
Why It Matters:
- Stronger brand equity: A growing business typically has a more established and recognizable brand, which is incredibly valuable when you go to sell. A well-known brand is a strong asset that buyers can leverage to attract new customers and grow the business further.
- Loyal customer base: Customer loyalty is a key indicator of a business’s future growth potential. Businesses with repeat customers or strong subscription models are often more attractive to buyers because they offer a predictable revenue stream. A loyal customer base provides stability, and buyers appreciate that they don’t have to start from scratch to build a customer base.
A growing business naturally builds a more recognizable brand and loyal following, which is a major selling point for any prospective buyer.
4. Growth Creates More Value for Your Business
It’s no secret that a business that is growing is more valuable than one that isn’t. A company with increasing revenue, expanding market reach, and an upward trajectory is far more likely to fetch a higher price on the market. Growth is often the driving force behind the appreciation of a business’s value.
Why It Matters:
- Increased profitability: As your business grows, so should its profitability. More customers, higher sales volume, and better efficiency can lead to improved margins and overall profitability. Buyers are naturally attracted to profitable businesses because they offer the potential for a good return on investment.
- Multiples and valuation: In mergers and acquisitions (M&A), a business’s value is often based on multiples of earnings or revenue. A business with a track record of growth can command higher multiples because it shows future potential for further growth. On the other hand, a stagnant business may struggle to fetch a good price.
By focusing on growing your business, you’re increasing its financial value, which directly correlates to a higher sale price when it’s time to exit.
5. Sustainable Growth Reduces Risk for Buyers
One of the biggest concerns for potential buyers is the level of risk involved in acquiring a business. A business that is growing in a sustainable way offers lower perceived risk because it demonstrates that the business model works and can continue to perform well even after the current owner exits.
Why It Matters:
- Proven business model: A growing business shows that the model works—customers are consistently purchasing, the market demand is there, and the business is running smoothly. Buyers are more likely to feel comfortable purchasing a business that has proven growth rather than one that is unproven or struggling.
- Market positioning: A growing business is often better positioned in the market than one that is stagnant. A well-established market position allows the business to weather economic downturns or industry changes, which reduces the risk for buyers.
Sustainable growth is a sign that the business has long-term potential, which makes it less risky and more appealing to buyers looking for a solid investment.
6. Growth Helps Build the Right Team and Leadership Structure
A growing business requires the development of a strong team and leadership structure. As you scale, you’ll need to hire and train employees, build a management team, and establish clear roles and responsibilities. A well-organized team is a key element in both growth and salability.
Why It Matters:
- Operational independence: A business that has a strong leadership structure and well-trained employees can run smoothly without heavy reliance on the owner. This makes it easier for a new owner to step in and continue the business without disruption.
- Appeal to buyers: Buyers want to know that the business can operate successfully without the current owner’s constant involvement. By developing a leadership team that can manage day-to-day operations, you’re increasing the business’s independence and making it more attractive to potential buyers.
As your business grows, building the right team and leadership structure will not only help you manage the increased demand but also prepare your business for a smooth transition when it’s time to sell.
Conclusion
Growth and sellability are closely linked. A business that is growing is more attractive to potential buyers, more likely to command a higher sale price, and easier to transition out of when it’s time to exit. By focusing on sustainable growth, building scalable systems, fostering brand loyalty, and improving your business’s overall value, you are setting the stage for both long-term success and a profitable sale. In other words, the more you grow your business, the more sellable it becomes—and the more rewarding your entrepreneurial journey will be.
Also read Struggling to Grow or Sell Your Business? Here’s What to Do
Disclaimer:
Any information provided here is for informational purposes only. It should not be considered as legal, accounting, or tax advice. Prior to making any decisions, it’s the responsibility of the reader to consult their accountant and lawyer. N3 Business Advisors and its representatives disclaim any responsibilities for actions taken by the reader without appropriate professional consultation.
