What do you track? If you are looking forward to a time when you can sell your company, what meaningful indicators help you make smart decisions? When do you sell? How much is your business worth? Should you push for growth, cut your costs or maintain the status quo? Here are the five trends worth tracking:
Your industry – Is it getting better, worse or staying flat? Are you and your customers in an industry that has a promising future; or are you losing business to Mexico or China? Are you, like Black’s Photography, in a business overtaken by new technology and becoming irrelevant; or, in an emerging new industry that is set to take off? Perhaps you’re in a mature industry that has flattened out and has little room for significant growth?
Your revenue – Is it going up, down or staying the same? Prospective buyers need to know what will happen to your revenue in the future. That’s what they are buying. But what is the trend in your year-end numbers? One good year does not a trend make. If you show a history of increasing your revenue each year and have every confidence it will continue to climb, you have a good story to tell.
Your expenses – Are they lower, higher or status quo? Are you in a business in which costs are escalating due to increasing employee salaries and benefits, raw material costs, negative currency exchange, or price of utilities? Or an industry in which your costs are going down due to improved technology, cheaper labour or competitive parts that you can access across borders?
Your profit – Is it higher, lower or flat? While your revenue and expense lines are important, the bottom line is the bottom line. How are you doing every year? While your goal is to keep taxes low by minimizing profits when you are building your business, you should now show strong profits and pay the taxes. You’ll get that back and more when you sell for a higher price.
Your joy of work – Is it fun and satisfying, frustrating and painful or just the same old same old? This is often a reflection of what is happening in the previously reviewed indicators above trends; but if your heart is no longer in the business, then it’s time to get out. Continuing may not be good for you or the business.
Tracking these trends will help you to know when it’s time to sell your business. You can control some and not others, but knowing them will help you to make better decisions.