Shannon Badger, CPA, Managing Partner at Badger.
For many entrepreneurs, building a company is not just about passion and profit—it’s about creating a strong foundation to ensure it has transferable value. You may find yourself asking the following questions in the process: What’s the “exit story” you want your company to tell? What’s the best way to foster employee success? How does one proactively address potential financial risks? How much is the business worth?
While there’s no one right approach, I’ve found the blueprint for a sellable company requires strategic planning and execution.
Every Company Should Have Strong Leadership
The driving force behind any company’s success is its employees. CEOs, as well as corporate acquirers and investors, recognize companies are only as good as the teams behind their leaders. Having great employees and senior management demonstrates operational continuity and stability. Investing in the right people allows your company to perform without founder involvement, enabling autonomous operations for fulfillment.
Establishing Brand Independence
Have you considered the marketing and delivery of your company post-departure? It can feel like a loss of authority and trust for customers and partners.
When marketing is centered around your personal brand, scaling—and eventually selling—becomes more complex. Take time to ensure a distinct visual identity and brand voice exist independently from the founder. The goal is to show potential buyers that your company/company values are independent of you. When a company is less reliant on the founder’s presence, the business is more likely to function efficiently and effectively.
Reliable & Recurring Revenue Streams
Do you have multiple and reliable streams of revenue coming in each month? Strong cash flow, profitability and growth trajectory matter, as well as customer retention. As a CEO, I consider any low churn revenue a major “green flag.” When customers know they can rely on a product or service, they are often more motivated to continue investing in the company. Cultivating strong relationships and exceeding customer expectations contribute to a healthy business. Take the opportunity to show how the business will generate a consistent income.
Having a diverse sales pipeline to gain a market advantage is equally vital. Buyers want to know how your business obtains new customers. When assembling a sellable asset, knowing the best approach to finding the right customers in the appropriate channels reduces dependency on a single source.
Clean, Audit-Ready Financials
Transparency and financial discipline are nonnegotiable. While a business broker can help small- to midsized businesses at every touchpoint of their journey, it’s best to consult with a CFO or expert CPA.
Investors want to see positive cash flow, stability and capacity for the company to fund future day-to-day tasks. Account auditing and accurate financial reporting can give interested parties what they’re looking for while also preparing you for long-term success. Businesses with well-documented financials instill confidence in potential buyers, as they’ll have performance indicators and insights at their fingertips.
Strong EBITDA ($5M-Plus)
Does your company have a healthy EBITDA (earnings before interest, taxes, depreciation and amortization)? This metric paints a clear picture of operational value for buyers. It accounts for interest, taxes and a decrease in the value of tangible and intangible assets. This process allows for an easier understanding of the strength of the business.
The Formula For A Sellable Company
A sellable company thrives without its founder, yields consistent revenue and demonstrates scalable growth. Whether you plan to sell in five years or 50, this key formula can maximize value and future opportunities.
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