How many hours a week do you work?
It may go without saying that a business where an owner works fewer hours to produce the same level of profit is going to tend to be more valuable and more marketable. Who doesn’t want to work less and make the same amount of money or more?
If you are looking at a longer time horizon before wanting to exit, focusing on making the business more passive to reduce the owner’s working hours while maintaining a similar level of profitability will make the business more marketable and valuable. You might accomplish this through better training of staff, delegating the owner manager’s responsibilities to other employees, creating more efficient systems, or adding automation.
If you are successful at reducing the owner manager’s time spent working in the business, some buyers may still be skeptical of that claim, and will wonder, “does the business owner really only work 10 hours per week, or is it closer to 40?” If, as an owner, you do work limited hours, it may make sense to create a work journal starting 6 months to a year before you are ready to sell. If you keep diligent daily records of the time you work and what tasks you do while you are working, it will help provide proof of your limited working hours. It’s important that this be accurate so that you won’t face assertions of mis-representation if, after a buyer acquires your business, they find themselves working 40+ hours per week rather than 10 hours as represented while doing the same basic tasks.
One good test to see if your business can run well with limited owner involvement is to take a 3-4 week vacation without working while you are out of town. If you can come back to a business that is running well despite your absence this will be a good indication that a new owner will be able to step into a business that is operationally sound where they can then focus more on strategic initiatives. Conversely if when you return the business has not run well, you can use the opportunity to evaluate ways to make your business more passive in preparation for your future sale.