Should you scale or sell your business? How do you sell a business, if that’s what you choose to do?
Once your business reaches a point of immense success, you have a big decision to make. You can either continue to grow your business or sell it to another company that’ll do the work for you.
Continue reading to decide if selling your business is the right move for you.
Decide Whether to Scale or to Sell Your Business
Once you’ve launched your entire product line and reached $100,000 in sales per month, you have a million-dollar business. So, what’s next? First, 12 Months to $1 Million by Ryan Moran writes that you can start paying yourself. Up until this point, you’ve been working hard and reinvesting your profit into growing your business. Moran suggests you pay yourself enough to work on your business full-time until you decide to scale or sell your business.
(Shortform note: Different experts offer different advice on when you should start paying yourself from your business income. While Moran suggests you wait until you reach the million-dollar mark, others write you can pay yourself sooner, as long as your business is stable and you have a good understanding of your business’s cash flow. When you do decide to pay yourself, you can either give yourself a regular salary or an owner’s draw, which is money you take out of your business on a regular basis or when needed.)
Next, you have two options for what to do with your business: you can keep growing it or to sell it to another company.
(Shortform note: In The Hard Thing About Hard Things, Ben Horowitz presents two questions you can ask yourself to decide whether or not to sell your company. First, ask yourself if the market you’re in is larger than anyone realizes. Second, ask yourself if your company has a chance of being the top business in that market. If you answer “yes” to both, Horowitz advises you to stay independent. Otherwise, you risk selling your company for less than what it’s worth.)
If you choose to keep growing your business, you should focus on transforming it from a sales machine that depends on your constant involvement to a sustainable business that can operate without you. To do this, Moran suggests you reinvest your profits in advertising your brand, creating content, improving logistics, and hiring team members. This frees up your time and energy so that you can focus on expanding your business.
(Shortform note: Although Moran says that you should build a business that can run without you, in The $100 Startup, Chris Guillebeau states that you may want to stay involved and keep your company small if you care about stability and freedom over making money. You can also consider a mid-sized model to reach wider audiences without sacrificing ownership.)
If you choose to sell your business, Moran suggests you focus on your long-term goals. You’ll likely retain a minority stake in your business and receive payments based on how well it performs, so he advises that you don’t settle for a quick payout and sell your business to someone who will treat it poorly. Instead, find a buyer you trust and are willing to work with. By selling it to someone who’ll treat your business well, you ensure that your business thrives and that you’ll continue to reap the rewards of your hard work.
(Shortform note: If you’re concerned with how to put your business into good hands, you can consider finding a professional adviser to help you sell your business. In Built to Sell, John Warrillow provides several tips for finding the right firms to aid you in this process: First, consider the size of your business. If it makes under $2 million annually, Warrillow suggests using a business broker. If it makes over $2 million, consider a merger and acquisition firm instead. Next, ensure that your adviser is familiar with your business’s industry, as this allows them to accurately recognize the value of your company.)
