When you have reached a point with your business where you are starting to think about selling, looking at your organization through a buyer’s lens is essential. How, exactly, will potential buyers assess your company’s value? What will convince them that your products or services are a good bet? And how can you assure them that your management team has what it takes to succeed?
That last question is a doozy because it forces you to reexamine your team’s merits and decide whether you are truly ready to pursue a sale. After guiding many clients through this process and buying and selling companies of my own, I have realized that there are three key things smart buyers tend to look for in a management team.
If you built your company from the ground up and hired people who genuinely believe in what you offer, you may be in good shape here – even if your team lacks certain skills for their given roles. Although you may have reached the limits of what you can personally do for the business, your management team may stay with the organization after the transition. Ideally, they will be energetic, excited, and ready to take the next step.
From the buyer’s perspective, this is the best-case scenario and is what we refer to as an A-team. Savvy buyers would rather take an A-team and a B-company than vice versa because they know the business lives and dies with the people who run it.
A motivated team is “coachable.” Coachability typically trumps innate skills in the buyer’s eyes because it means your team will have the drive required to learn. You can teach people management skills and help them learn new disciplines. You can also bring in the structure the business needs to succeed – the proper systems, reporting, and analytical rigor, for instance.
If your team is there purely for the paycheck, however, or if they have ownership in the company and plan to cash out, you have some work to do. A professional buyer will likely sniff this out immediately because they know an apathetic, low-energy team will have a harder time making the transition, be challenging to train, and may never deliver.
2. A Deep Understanding of and Compassion for Your Customers
The market is overflowing with companies that have “solutions” that are looking for problems. In other words, instead of building a product that solves a real problem for real customers, these organizations develop products with little thought about who their target audience is and what they want. Then, they try to manufacture a reason for people to buy those products. Businesses of this nature are typically a bad investment.
In my experience, buyers tend to seek management teams that are more interested in serving the needs of their customers and solving their pain than in making a profit. These teams strive to know everything about their customers, down to the last psychographic detail, because they want to build a solution their customers will truly value.
Why does this matter so much? Because these teams have initiative and purpose. They know who their customers are and where to find them, and they are determined to make them happy. They are disciplined and focused in their approach to adding value. That makes it easier for a buyer to step in, contribute to their mission, and (ultimately) deliver a return on the investment.
3. A True Sense of Empowerment
Business owners looking to sell their companies often plan to step down when the deal closes. And that is fine, even desirable unless you have been calling most of the shots and haven’t distributed responsibilities to your team, empowering them to run the company.
There are exceptions to this, of course. For example, sometimes, the owner stays on for a certain amount of time because their knowledge is so proprietary that they must help with the transition. But most of the time, professional buyers look for a management team that can function independently of the owner.
So, my advice to any business owner considering selling their company is to make yourself redundant. Before you start looking for a buyer, hand over responsibility to other people on your management team and give them ample time (at least 6 to 12 months) to operate in those capacities before you plan to leave.
When you have taken your company as far as you want to and are preparing for a sale, assess your management team from the buyer’s perspective. Does your team exude passion? Are they hyper-focused on delivering value to your customers? And are they capable of running the business without you? If not, take the time to make some changes. An A-plus management team that is motivated to succeed is much more likely to attract high-quality buyers willing to pay top dollar.
Editor’s Note: This is an updated article that was originally published on Forbes.