If you’ve ever looked into the idea of selling a service-based business before, you probably came away with a somewhat negative view. Conventional wisdom is that a small service business — where the owner’s skill and ability makes up the majority of the company’s income potential — is notoriously difficult to sell and is unlikely to fetch much money if it does.
And, in a lot of cases, that’s true.
However, there are certain circumstances where it’s not only possible to sell a service business, it’s a great idea. And, there are other circumstances where it’s worth a try even if it’s not likely to earn you top dollar.
So, let’s jump into five reasons why you may want to seriously consider selling your service business:
You’ve successfully turned it into a product business
When it comes to selling a business, it’s traditionally far easier and more profitable if that business sells products than if it sells services. That’s because products are more tangible and easier to quantify. The quality of the product doesn’t generally increase or decrease over time. Production and distribution of a product is tremendously scaleable and they aren’t based on the whims, health, or family circumstances of an individual.
That’s why so many businesses that started out as strictly service businesses have eventually incorporated products into their offering. And, in many cases, have even eliminated services once products take off. The classic example is the consultant who writes books or puts on seminars, thereby scaling the salable use of their knowledge and skill so they’re no longer trading hours for money.
One good real-life example of this phenomenon is 37 Signals, originally started in 1999 as a web design agency. After some time, however, they developed a powerful project management software called Basecamp that became incredibly popular. In 2014, they changed the name of the company to Basecamp, jettisoned the service end of the business, and have been able to successfully scale to support an ever-growing community of Basecamp users worldwide.
You’ve scaled to the point of predictability
This can occur if your services business is not so much based on your own personal level of skill and knowledge, but rather on a set of skills that are in high demand and that you have been able to successfully staff for.
Traditional examples of this type of service business may be landscaping, cleaning, or trade work. If you’ve built a service business with enough skilled and support staff on hand to keep new business flowing in and keep existing customers satisfied, that breeds longevity and a strong financial backstory. After a while, your long term success can earn confidence in the eyes of a prospective buyer, making selling your service business a breeze.
As is the case with any successful business sale, it’s vital in this case to have built the business to the point where you (as the owner) are no longer integral to the day-to-day operations. That way, another owner can confidently step into that role with the assumption that the machine will …read more
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