The 3 Things That Make a Business Sellable (Even If You’re Not Selling Yet)

Want to build a business someone actually wants to buy? Start here. In this video, Steve reveals the three key factors that make a business truly sellable—and why most owners overlook them until it’s too late.

You’ll learn what buyers really look for, how to increase the value of your company, and how to build a business that’s not just profitable—but desirable. Whether you’re planning to sell soon or someday, these insights will help you create more freedom, more options, and a more valuable business.

TRANSCRIPT:

If someone offered to buy your business, would they even want it? In this video, I'm going to walk you through the three things that make a company sellable, even if you're not looking to sell your business. And don't worry, because if you have issues in any of these areas, I'm also going to show you how to fix them. Let's go ahead and jump in.

Number one, when it comes to making a business sellable, there has to be transferable value. Here's what I mean by this. When somebody buys a business, they're essentially buying an asset. In other words, they're buying this cash flow machine. This is my cash flow machine. They're over here and they're going to put cash. Here's a dollar bill. They're going to put cash into the machine. And hopefully over time, they're going to get cash out of the machine. So if they put one, they're going to want to get three or five or ten or whatever. So there's this whole input process where they put cash in to get cash out. And there's also this time element, which says, how long is it going to take them to get their cash back out of the system? Now, in order to have transferable value, this person right here is going to want to buy a business, which will allow them to get this right, to get their money back in a certain way. Now, in order to have that certainty that they're going to get the same results that they're expecting, there has to be transferable value, which means the business has to run by itself. Now, this is where a lot of problems come in because business owners right here, they create key man risk, key person risks, whatever, right? Gender neutral. So you have all these people in the business, they rely on this one owner and guess what? If they disappear, the business also runs into problems. So if you're wondering right now, do you have transferable value in your business? I would say this, go on vacation for 90 days. Okay. Start with 90 days, turn off your phone, tell your employees, they cannot reach out to you. You're not going to respond. You're not going to get back to them. And if your business doesn't implode in 90 days, then it means that your business can probably run without you. And if you want to push the limits, go to six months or go to one year. Now, if you're nodding your head thinking, dang it, I do have key man risk, key person risk in your business. How do you fix it? The way you fix that is through systems. So it requires you to create SOPs, requires you to have checklists. It requires you to have processes, which will allow you to scale, to repeat the things that you do. You can't have everything up here in your head, or that is super problematic for your business. So transferable value is number one. And if you can transfer that value without the business relying on you, then you have checked the first box, right? That's number one.

Number two, in order to have a valuable business, you have to have predictable cashflow. Now here's the deal. When you're valuing a business, there are a few ways to do it. One of the nerdiest ways is to build a DCF, a discounted cash flow model. And this falls under the income approach devaluation. And basically what you're doing is you're looking at cash over this forecasted period. So you forecast out cash, and usually it's five to ten years out. So you have cash right here. And the way you forecast out cash is you start with revenue, and you go down the line, account for all your costs, etc., and you get down here to cash flow. Then there's this whole continuing value side of your business, meaning you have to put a value on how much is the business worth into perpetuity, because it's not going to just end at the end of this forecast period. And all of this, to say, okay, all this is dependent on cash, baby, right? Cashflow. So predictable cashflow is key because think about it. If you're building a forecast, right? You're trying to forecast this out and you're looking at historicals in one year, cashflow is 100. The next year cashflow is 500. The following year is 50. The following year is 650, etc. This lumpy cashflow creates a lot of uncertainty and a lot of risk for investors because here's why. Most of the time when somebody goes to buy your business, they're going to have debt and they're going to have equity in the deal. And if they have debt, they have to service that debt. And in order to service that debt and to have the confidence that they could cover these debt payments, they're going to want to have stable cashflow. So if your business doesn't have predictable cashflow, what you could do is you can look at your core offer. So look at the core offer in your business and see how much revenue is generated from that core offer. And if you need to strengthen that core offer, hey, that's something that's super valuable to do because it will make your cashflow more stable. So you could do recurring revenue. You can do reoccurring revenue. You can structure your offer or your pricing in a way that will allow you to have this predictable cashflow.

When I was starting out in business at 16 years old, I had a landscape company and we would go out there and we'd build these beautiful landscapes. This is a tree. These are some boulders. Here's a little fire pit right here. Right. And we'd create these beautiful landscapes. And these jobs oftentimes were, you know, like a hundred to, you know, $300,000 a piece, which were great in their super high margin. But the problem was, is that it created a lot of instability in the business because we'd have to go out there and get work and then do work, get work and do work. And it was feast or famine sometimes, because if the economy changed or if the weather changed, whatever it was, then our revenue and our cash will ultimately look like that is very lumpy. Okay. Which creates a lot of anxiety for somebody running the business. So that's what I said at the beginning, whether you're looking to sell your business or not, a sellable business is a scalable business, and it gives you more freedom, more options, more cash, etc. So what we should have done, and I didn't do this, is we should have done more maintenance work. So maintenance work would have included going to this site, pulling weeds, planting flowers, doing upgrades, you know, power washing off the patio, whatever it was, but doing recurring maintenance work. So we had that steady cashflow, but I didn't. And guess what? We ran into some problems and it wasn't fun. So predictable cashflow in your business is critical. If you don't have sticky cashflow, think about ways you can create new offers, strengthen your offer, diversify your business, etc. So you have predictable cashflow. Part of this too, is ensuring that you have metrics in place so you can actually measure this and you can forecast it out. So having those tools is going to be super critical.

And number three, the last one that makes a business sellable is growth potential. All right. So your business has to have growth potential. If your business has been flat or even declining with sales, like if this is your sales right here, it's just like flat, a little uptick, flat, that doesn't give an owner much incentive to buy your business because they want to buy your company right here and they want to drive higher growth so they get their money back and to get more of their money back, like I was drawing up here. So growth potential is key. That's why you need a strategy and strategy involves market focus and position. So understanding what market you're competing in is really critical. I'll just put market focus and position, and perhaps your business is being cannibalized. Maybe it's disrupted. Maybe it's saturated. Maybe it's time to pivot and try another segment. It doesn't mean you need to bet the whole farm on it. But the way I look at growth and strategy sometimes is like you have your core business right here. And what you could do is you could start running experiments with other adjacent businesses. All right. So it means like if you're doing plumbing work, maybe you want to try out offering electrical work, right? This is an adjacent business. It requires oftentimes similar tools. There may be some specialty tools, but it's a similar type of business model and you can mess around with this and see if you're successful. But I wouldn't have bet the whole farm. A giant pivot is going from plumbing all the way over here to become a tech company, right? If you made that pivot, that is going to introduce a lot of risk to your business. So what I do is start with adjacent ideas, other markets, new products, new services. But the key is you have to figure out a way to drive greater growth into your business and have this playbook.

I was just talking to a client yesterday and we were talking about their sales and marketing function. And I said, look, you have to figure out a system to get more leads, to strengthen your offer and to drive revenue. And if you can't do that successfully, it's going to be really hard to build a sellable business. How you position yourself in the market, the system you use to generate leads and to increase your LTGP, your lifetime gross profit to customer acquisition, cost ratio, your LTGP to CAC, right? That's really critical, is going to be a big determining factor on the sellability of your business.

These are the three things to focus on. This is what makes a business sellable. Remember, a sellable business is a scalable business. What do you think? Do you agree with this? I'd love to hear from you. Drop some comments down below so I know that you're alive. And if you have any other ideas about topics that are interesting to you as it relates to strategy, scaling, and exiting while you're building a profitable business, just drop it down below and that helps our team to plan out future episodes. If you need help with any of this, you can always reach out at coltivar.com. And until next time, take care of yourself. Cheers.