Business Model Problem: Desire to Sell the Business
A business counseling client once said, “If I didn’t own this place, I’d quit.” Because the business owner can’t quit, many business owners use the hope of selling their business as the universal magic wand to fix their frustration.
Often, a business owner has been slaying the dragons of his everyday business for years only to wake up the next day and find a different dragon. This fight gets old. Frustrated with the lack of permanent progress, the business owner gets a bright idea — sell the business and push the problems on to somebody else, and get paid to do it. Sounds like a pretty good plan.
Frustration, however, is never a good reason to sell a business. As the buyer performs due diligence, the skeletons will come out of the closet. The buyer will recognize that these problems need to be fixed and demand to get paid to fix them.
The better solution is to stop chasing symptoms and start chasing the underlying problem — the business model. Ask yourself, “If the buyer could pay me only for my business model, what would the company be worth?”
Remove all the company’s value tied up in human, customer, and physical capital. What’s left? If you’re Coca-Cola, there’s $77.8 billion left — the estimated value of the Coca-Cola brand and business model.
Make a list of all the things that are bugging you about your business, and then write down your proposed solutions. That’s a great start, but you’re not done. Now move one level higher.
How does your solution to each problem fix an underlying issue with the business model? If your solution doesn’t improve the business model, you need to come up with a better solution. If you do, you’ll improve your business model and improve your payday when you sell the business.