5 ways to make your startup more attractive to buyers

You might build a business, even a profitable one, but it’s unlikely to be your big payday.

Your big payday comes when selling your business.

That day might seem distant, but for the biggest return on your hard work, there are things you can do now to make your business more attractive to buyers later.

When I built my previously acquired business, Bizness Apps, a mobile app builder, I knew I wanted to sell it from day one. That ended in a multimillion-dollar acquisition ten years later.

But you don’t need to wait as long as I did. Smaller acquisitions – even in the tens of thousands – don’t just free you to work on new projects but can also fund them.

Today I help 1,000s of founders get acquired as CEO and founder of Acquire.com.

Here’s what I’ve learned about what makes a business attractive to buyers.

1. Automate everything

Buyers hate busywork. Admin. The little chores that demand more of your time as your company grows.

Admin takes buyers away from the work that earns a return on their investment, like acquiring and retaining customers. If your company more or less runs by itself, buyers can pursue growth.

For example, at Bizness Apps, we used to need 10 people working on uploading apps to the App Store because it was a 45-minute job each time.

Then we built software that automated the delivery of these apps to the Apple Review Team, freeing our teams to focus on more fulfilling and rewarding work.

Here are some other areas you could automate:

• Calendars and scheduling: Apps like Calendly save you time fiddling with calendars to secure a time to speak to a customer, partner, or vendor.
• Customer support and ticket management: Self-service helpdesks with answers to common questions, chatbots, asynchronous webinars, and other tools can enable customers to help themselves.
• Product renewals and upgrades: Email automation on product renewal dates or notices of approaching higher plan tiers can save you or a marketing team from chasing or retaining revenue manually.
• Customer onboarding: Videos, demos, chatbots, and webinars are all possible automations that free customers to onboard themselves without consulting you or your support team.
• Social media management: Schedule your tweets months in advance and get notified of social media mentions of your business without manual input.
• Employee onboarding: Create templates for pre-start forms and a three-month onboarding plan with all the guidance new starts need in written or multimedia form.
• Accounting: Pull together your payroll, income, expenses, and so on into one system or platform that automates basic admin and sends reminders for anything it can’t automate.

Automation shows buyers you run a lean, agile company that values scalability and efficiency – two maxims of every acquisition strategy.

2. Create recurring revenue

This might be a “well, duh” moment, but not all recurring revenue is alike.

First, lifetime subscriptions are great at getting customers through the door. But their lifetime value drops to zero after that first payment. The revenue only recurs if you upsell them.

“What about monthly revenue then?” The golden standard, you might think, and for some customers, that’s true. But the annual subscription:

• Reduces customer churn by up to half
• Attracts high-quality customers who need your product
• Gives you more upfront cash to reinvest

We helped scale Bizness Apps by charging a yearly upfront fee, which allowed us to reinvest more cash into growing the business in a shorter timeframe.

That’s why you’ve probably noticed software vendors offering annual subscriptions cheaper than monthly ones. They can do more with the cash upfront than spreading it over 12 months.

Buyers might review your recurring revenue as part of a quality of earnings report. Especially on bigger acquisitions.

Monthly subscriptions are fine, but you need to work harder to convince customers to stay. You have less time to demonstrate the full value of your product.

Persuade customers to pay annually, and you’re not in such a mad rush to retain them. You must consistently check in and listen to them, of course, so you’re always improving, but by committing to annual subscriptions, they’re already pretty convinced you’re the company for them.

And engaged, high-value customers are a big asset to buyers.

3. Focus on sustainable growth

If you’re running a profitable yet growing business without any outside funding, congratulations. You’ve found the holy grail of acquisitions. The ultimate buyer fantasy.

Why? A revenue-at-all-costs approach, the kind of hyper-growth strategy venture capitalists might encourage you to pursue, often comes with unpleasant side effects.

For example, you could stress yourself silly, end up hating the job, and easily burn out. Imagine the impact on your employees and company performance.

Also, it can encourage the wrong behaviors. With piles of investor cash in the bank, it’s tempting to spend on another ad campaign rather than work out why growth has plateaued.

I bootstrapped my first life-changing exit. Every dollar counts when bootstrapping, so we relied heavily on storytelling and press to scale Bizness Apps and find customers. We were featured multiple times in just about every publication you can think of, from TechCrunch to Forbes.

When we acquired new customers, we did everything possible to make them happy. Happy customers are your most sustainable source of revenue. Delight them and they’ll return time and again.

Stay lean, agile, and responsive to the market and you’ll not only profit when your VC-backed competitors are burning cash, but you’ll attract plenty of buyer interest too.

And once you’ve built and sold a company, you’re infinitely wiser as to how to spend investors’ cash should they offer it to you in the future.

4. Write the book on how to run your business

Never underestimate the power of convenience.

Buyers are attracted to turnkey businesses. Those that can run with little effort because they’re automated and documented. They want you to make it easy to earn their return.

Amazon, for example, isn’t always the cheapest, but it’s one of the easiest shopping experiences. With a massive product range, free delivery, and a seamless checkout experience, it’s little wonder why so many people love shopping there.

Apple, too, has gone to great lengths to make buying decisions easy by designing products that “just work” out of the box.

Can you make your business “just work” after acquisition?

Yes, you can. Not just with automation, but also by writing the book on how to run your company. A buyer will excuse a little extra work if you’ve given them comprehensive and lucid instructions of what needs doing.

Attack this project like writing a training manual:

1. Identify everything you do to run your business. Include people, technology, vendors, partners, and more. What bricks is your business built from and what keeps it standing?
2. Document every process so that it’s easily repeatable. It’s okay to assume some prior knowledge from buyers, but generally, assume you’re drafting a manual for someone new to the industry.
3. List your people, customers, partners, and vendors. Keep your HR records, customer lists, partner profiles, and vendor information in one place with contact details so buyers can find what they need fast.

I was fortunate enough to have a management team when I sold Bizness Apps in 2017. They helped me prepare documentation that explained every aspect of my business, including:

• Internal wikis
• Employee handbooks
• Sales guides and processes
• Customer support templates
• Helpdesk articles
• Tutorial videos

A benefit of this exercise is that you might spot areas to improve – knots of inefficiency you could unpick and increase your profit margin.

After all, if you can’t explain how your company is run – or why you’ve chosen to run it that way – you stand little hope of convincing a buyer to acquire it.

5. Write playbooks for future growth

Think of your business as a ship and each port is an exit event where the captain changes. You, the old captain, have arrived at port, ready to disembark for a new adventure.

The arriving captain wants a ship that’ll go the distance, a vessel that’ll carry them to the next exit event in a few years. To help the new captain succeed, you might share navigational charts, introduce them to the crew, and give them a tour of the ship.

It’s the same when selling your business. You want to equip the buyer with realistic playbooks for success as well as help them understand your business and the people running it.

Financial buyers, the most common type you’ll encounter, are primarily interested in your company’s performance:

• Profit (EBITDA or SDE)
• Revenue (MRR and ARR)
• Churn rate
• Growth rate
• Customer acquisition cost
• Lifetime value of customer
• And lots more…

Buyers will use these metrics to forecast performance and calculate your valuation. The more evidence you share with buyers to justify your valuation, the likelier they are to pay it.

For example, identify growth opportunities and strategies to achieve performance targets. Research trends and macroeconomic factors that might impact the metrics above. How could buyers exploit or defend against such changes?

Example playbooks might include:

• Updating marketing messaging to focus on power users
• White-labeling your product to other businesses
• Building a feature customers have been begging for
• Introducing new or updating pricing tiers and plans
• Embracing SEO and content marketing

Before I hired my CFO, Brian Cross, at Bizness Apps, we had a rough idea of where we were headed financially, but not nearly enough about why. We didn’t understand churn or have a roadmap for future growth. But when Brian arrived, that all changed.

Once we understood how our business performed, it became much easier to scale because we knew every dollar spent earned a return. And Brian provided the complex financial models that helped sell the business to a financial buyer.

When listing your business, outline potential growth levers and their impact on your financials. Give buyers a chart to that buried treasure. Whether they find success or not is up to them – just show what’s possible and how to achieve it.

The days of building one business for a multimillion-dollar investment followed by an IPO are over. For most founders, they never really began. They call them unicorns because they exist only in dreams for 99 percent of founders.

Instead, think of entrepreneurship as an investor might, as a portfolio of simultaneous or successive bets on yourself. Each time, you get better, multiplying your chances of a life-changing exit. I hope the tips above help you find yours. Good luck!