There are two questions any serious business owner needs to ask: “who will own my business after me?” and “is my business transferable?” A thorough review of your company’s objectives should provide you with a clear answer to these questions. Check how much of your company is dependent on certain individuals, including you.
But what is a transferable business? By definition, a transferable business is one that can be owned and run by someone else without you constantly checking in. This means that individual efforts should not be indispensable to the success of the company.
Here is a list of the items that you need to take into account to create a transferable business.
1. Risk of owner dependence
This is pretty basic information. If the company cannot run without you overseeing then don’t expect that a buyer can just walk in and immediately take the controls from you.
In addition, when the business’ owner dependency is higher, then the risk risks associated with the business also becomes higher while the overall value becomes really low.
2. Creating, selling and delivering your business’ products and services
As a business owner, you lead in the creation, distribution and delivery of goods and services. How involved are you in each of these steps? In most instances, you may have a high level of involvement one or more of these areas. Therefore, you are most knowledgeable on these areas and may have difficulty transferring these essential pieces of information to the new potential owner.
3. Other areas to assess
Below is a list of other areas that need further evaluation in terms of owner dependence.
• Do you make the key decisions?
• What percentage of the major accounts do you handle?
• Do you have a written process flow? What is your assurance that it is followed?
• What is your level of involvement in keeping financial records and bookkeeping?
• How often do you meet with your management team to discuss about business objectives?
You’re asking these questions and assessing yourself in these areas in order to get a general understanding of what you need to change in order to make your business transferable.