Imagine your company five to ten years down the road: what does it look like? Do you see a well-run organization operating smoothly and proactively? Or is it a more hectic, reactive environment where fires are constantly put out? Maybe you see yourself relaxing on a beach, now that you’ve sold the company? While the beach life may be slightly further out of reach, the beauty of this exercise is that it allows you to plan now for how to achieve your desired outcome. By contemplating what you want your company to look like in the future, you can determine the steps needed to accomplish this.

As an experienced entrepreneur and advisory board member who has been through the process of building and selling companies, I’ve developed this series as a blueprint for the steps that should be taken in running and building your business to achieve your desired end-state. My goal is to help you address all of the aspects of your business that would be impacted by a sale or capital raise. This particular series is geared towards entrepreneurs who have started their own business, but in the future I plan to discuss how to implement “startup culture” into established businesses (which tend to be less agile and flexible).

Company Lifecycle and Its Impact on Planning

Lifecycle can be a complicated topic; some companies are “young” but mature, while others are “old” but less mature. Life cycles can vary widely by industry, region, funding type, or even business cycle. Depending upon your goals as owner, your company’s age, and your company’s maturity level, you may or may not benefit from some planning, strategies, policies, or procedures.

Throughout this series, I’ll avoid making assumptions about where your company is on its path; however, here are some general guidelines based on company stages:

1. Idea Stage: If your company is still just a twinkle in your eye, you are in the wonderful position of being able to build your company from the ground up using all of the right blueprints and materials I’ll be providing. This is the ideal time to lay the foundation for a saleable company.

2. Early Stage: If you’ve already established your company, but it’s still in the early days, it’s often easy to implement new procedures and systems. From my work with my own companies and others’ startups, I’ve found that it’s best to establish policies before bringing on additional resources, whether in the form of internal labor or external service providers.

3. Growth Stage: Even if your company is further along the maturity curve, you can still implement much of what I’m going to be presenting. It’s more difficult to change or instill a “culture” or attitude once there’s already an established environment, so focus on setting expectations and overarching principles.

4. Mature Stage: For established companies, the focus should be on optimizing existing processes and addressing any gaps in your current practices. This might involve more significant change management efforts, but the payoff in terms of increased company value can be substantial.

Why Start Planning for an Exit Now?

It may seem counterintuitive to begin thinking about selling your company when you’re just starting to build it, but this is actually the perfect time to do so. Here’s why:

1. Building the Right Foundation: Even if you don’t end up selling your company, operating under the assumption that you will sell someday helps you ensure that you’re taking care of all the important aspects of your business.

2. Avoiding Common Pitfalls: Often entrepreneurs are solely focused on developing their product or service, and forget to consider the more administrative aspects of running a business. Although it’s not sexy and cool to think about bookkeeping and HR compliance, staying ahead of the curve will pay off when you go to sell.

3. Creating Enterprise Value: By implementing best practices from the start, you’re building a more valuable company. This translates to a higher valuation whether you’re seeking investment or planning an exit.

4. Attracting Potential Buyers: Companies that are well-organized, compliant, and have strong processes in place are more attractive to potential acquirers. They represent less risk and a smoother transition.

5. Flexibility for the Future: Even if selling isn’t your current goal, having a company that’s built to sell gives you more options down the road. You’ll be prepared for unexpected opportunities or changes in the market.

What This Series Will Cover

As someone who has been through the process of building and selling companies, I’ll be sharing insights and practical advice across several key areas:

1. Legal Aspects: I’ll dive into the legal foundations necessary for a saleable company, including corporate structure, contracts, intellectual property protection, and regulatory compliance.

2. Finance: I’ll cover financial best practices, from basic bookkeeping to more advanced financial modeling and valuation methodologies.

3. Human Resources: Learn how to build a strong team and implement HR practices that will stand up to due diligence.

4. Tax Planning: Understand the tax implications of various business decisions and how to structure your company for optimal tax efficiency.

5. Information Security: In today’s digital age, robust information security practices are crucial. I’ll cover the basics and beyond.

6. Logistics of Sale: Finally, I’ll walk through what to expect when you’re ready to sell, from finding potential buyers to navigating due diligence.

Conclusion

Building a company with an eye towards eventually selling it is about more than just preparing for a future transaction. It’s about creating a well-run, valuable business that gives you options. Whether you ultimately decide to sell, seek investment, or continue growing independently, the practices I’ll discuss in this series will set you up for success.

As an entrepreneur who has been through this process multiple times and now serves as an advisory board member for growing companies, I can attest to the importance of getting these fundamentals right from the start. It’s always easier (and less expensive) to build things correctly from the beginning than to try to fix them later.

In the next post, I’ll dive into the legal aspects of building a business to sell. Stay tuned for practical advice and real-world examples that will help you create a company that’s not just successful, but truly valuable.