When preparing the company for sale, should owners focus on profitability or growth?
My answer may surprise you.
My opinion is that owners should do whatever is in the company’s long-term best interests as opposed to dressing it up for sale. Because Volaris never sells its acquisitions, we’re invested in the long-term growth of our businesses. Our long-term view is why we encourage companies to continue investing in their future while they prepare the business for sale.
Why separate growth initiatives from the core business?
Separating growth initiatives from the core business allows buyers better insight into your financials. Buyers may judge core investments and initiatives differently.
If measured appropriately, the investments you make in your company’s growth should not affect the value of your business at the time of sale. However, many business leaders don’t track and measure their business in a way that clearly differentiates between the existing business and future investments. From a buyer's perspective, combining the investments makes it difficult to understand the strengths of the existing business.
How to separate growth initiatives from the core business
When splitting costs, you’ll want to ensure that you allocate staffing expenses accordingly. Consider how many full-time resources you have working on your growth initiatives vs. the core business. If you have an employee splitting their time, track what percentage of their time was spent on initiatives versus core activities.
Set your company up for long-term success
If you want your business to be around for the long haul, preparing it for sale should not change the way it is run. My only words of advice in this regard are to consider how you are understanding and tracking your investments in the core versus investments in growth initiatives. Owners can potentially expedite and improve the accuracy of their offer by splitting these items in advance so that the investment in each area is clear to the buyer.