Unlocking Your Business's True Potential: The Sellability Score

Welcome back to another edition of The Wise Exit!

In today's issue, we're covering:

• Understanding your business's Sellability Score.

• The ins and outs of business broker fees.

• Key factors driving business value.

Let's dive in!

Unlocking Your Business's True Potential: The Sellability Score

Ever wondered how attractive your business is to potential buyers? Enter the Sellability Score — your golden ticket to understanding and maximizing your business's value.

Let's break it down:

What is a Sellability Score?

Developed by John Warrillow, the Sellability Score is a numeric rating (1-100) that shows how easy or difficult it would be to sell your business. It's like a report card for your company's marketability.

Why Should You Care?

• Spot Areas for Improvement: The score highlights where your business shines and where it needs to be polished.

• Always Be Ready: You never know when an opportunity to sell might arise.

• Understand Your Net Worth: It clarifies how much of your wealth is tied to your business.

• Set Realistic Expectations: Know your true value for confident negotiations.

The 8 Key Components:

1. Financial Performance: How healthy are your books?

2. Growth Potential: Can your business expand?

3. Competitive Advantage: What sets you apart?

4. Valuation Teeter-Totter: Can you self-finance growth?

5. Customer Satisfaction: Are your clients singing your praises?

6. Switzerland Structure: Are you overly dependent on any one stakeholder?

7. Recurring Revenue: How predictable is your income?

8. Hub and Spoke: Can your business thrive without you?

Boosting Your Score:

Address weaknesses head-on:

Identify the areas where your business scores low and create specific action plans to improve them. For example, consider hiring a CFO or implementing more robust accounting practices if financial performance is weak.

Diversify your customer base:

Reduce dependency on a few key clients. Aim to have no single customer account for more than 10-15% of your revenue. Explore new markets or customer segments to spread your risk.

Build a team that can run the show without you:

Develop strong middle management and document your processes. Create detailed operations manuals and cross-train employees. This shows potential buyers that the business isn't dependent on you, the owner.

Remember, a score of around 80% is ideal, showing your business is highly attractive to buyers.

But don't wait until you're ready to sell to start caring about your score. Make it a habit to assess regularly — it's your roadmap to building a more valuable, sellable business.

Featured Blog 📰

Are you thinking about selling your business? You might wonder about the costs involved, particularly when hiring a business broker. Our latest blog post dives deep into the world of business broker fees.

We cover:

• What business brokers do and why they're worth considering.

• Different types of broker fees you might encounter.

• Factors that influence broker fees.

• Possible alternatives.

Plus, we answer some common questions about negotiating fees and tax deductions.

Check out "Business Broker Fees [Explained] - What You Need to Know" on our blog.

M&A Tips from Brian Dukes 💡

Ever wonder why some businesses sell for a fortune while others struggle to find buyers?

It's a great question, with too many tragic failures for me to accept.

Here are 3 factors that drive the value of a business:

Read the full post on LinkedIn.

That's all for this week!

Remember, building a sellable business is an ongoing process. Keep assessing, keep improving, and keep building value.

Best, Brian Dukes