This post was originally created on the 25th of March 2016.
Sellability is the concept of being able to sell something, easily.
If we think about vinyl records as an example. Since their inception to the mainstream in the 1930s they were popular and easy to sell. They captured a moment, a feeling, a memory. Vinyl records had sellability.
Roll forward to the late 80s, 90s and into the millennium and they found themselves in the wilderness. Almost everyone had moved to CD’s and then downloading and finally streaming services like Spotify. Yes, there was a core of die hard supporters particularly for niche genres, but it wasn’t easy to sell vinyl any more. It had lost its sellability factor.
Thankfully, the market turned again in the 2010s and vinyl now has its sellability factor back.
Looking for a handy checklist that will walk you through all that’s needed when preparing your business for sale? We’ve created one with all you need – and you can download it here.
What is sellability
Sellability is having a product or service which can be sold in combination with the ease at which is can change hands.
To have something which can be sold it must have at least some of the following factors
- merchantable quality
- sought after
In the 1990s vinyl was a product which could be sold, but it was not easy to sell. You found more records moulded into sweet dishes or turned into artwork than you saw being sold in music stores.
Saleability v’s sellability
These two words are often interchanged but there is a subtle and important distinction between them.
Saleability means something can be offered for sale.
Sellability means something that is able or likely to be sold.
There was a small cottage with a thatched roof some years ago which hit all the TV news bulletins in the “and finally” funny sections before the weather. Its chocolate box appearance was divine. Roses around the door and a picket fence around the garden. It was absolutely something which was being offered for sale.
Zoom backwards to a wider angle and the TV news delighted in showing the alternative vista. This quaint cottage was literally just a stones throw away from Sellafield nuclear processing plant. The reactors towered over its diminutive thatch on the other side of the garden fence.
The cottage was most definitely lacked sellability. It was not able or likely to be sold, at least not easily.
That is the subtle but important difference.
What is sellability in business?
Every business can be sold. Every business is saleable. Not all businesses have sellability.
Sadly, this distinction is all too evident in the 2020 pandemic and numerous business on the brink of administration, have entered into CVAs, have been rescued from one or closed their doors for good. All have had the potential to be sold, few had the sellability factor and the list is quite wide ranging and includes brand names that held a lot of value previously;
- Kath Kidston
- Victoria’s Secret
- Go Outdoors
- T M Lewin
- Bensons for Beds
- Harveys Furniture
- Caffe Nero
- Nationwide Accident Repair Service…..
A business needs to attract a buyer on a number of levels. It also has to compete with other businesses for the attention of buyers.
At the top level, buyers are looking for a business to have;
- Independence from the owner. Buyers know that if you, as business owner, are an integral part of day to day operations, the transition to a new owner is less secure.
- No skills gaps. Again, this is particularly related to you, as business owner, and any others who will leave with you at the point of sale. What skills do you collectively have that the new owners will have to replace themselves, or by hiring additional staff.
- Be self running. If you have trained and engaged employees throughout your business to deliver to customer expectations consistently, it is a more attractive proposition to a buyer.
- Processes and procedures properly documented and followed. This covers production, service, health & safety, complaints handling and every aspect of the business. How easy is it for the new business owner to pick up the way your business runs.
- Hierarchical structure in place. By having a hierarchy either in your direct employees, or through sub-contracted roles your business begins to attract investors as well as those who already work in your specialism.
- Diverse and complimentary. More than ever, buyers are looking for diversity into complimentary but differing markets. If one market fails, they have security of continued trading in other directions.
So if your business can prove some of these factors, you begin to stand out. You begin to look different to the buyer. A more attractive purchase. A more secure investment.
What does sellability mean for increasing business value?
Sellability inflates prices across all markets. It sits alongside desirability in how it can drive demand.
The Christmas 2020 new music releases includes “What the Future Holds” by Steps which you can buy on iTunes for £6.99. Go to the HMV online store and a limited edition pink vinyl copy is retailing at £19.99.
What has been created by teaming the band, the new songs, vinyl and a limited edition pink version together is a unique product that can command a higher price, (until the market proves otherwise and it finds its way to the bargain bin).
Okay, so a bit of a left field example, but you get the point. Put something different into your product and you command a higher price for it. Selling your business is no different to selling any other commodity in this respect. Make it different, in a good way, and it will command a higher price.
In the business sale market, having the elements of sellability outlined earlier brings with it the ability to increase business values. It will also increase demand for your business, and it only needs two competing buyers to generate a bidding war.
sellability = higher sale values
And the side hustle from this is giving your business more sellability to a buyer generally makes it more appealing to do business with altogether. Often sellability comes hand in hand with increased turnover and profitability.
How to make your business more sellable
The principles we follow to make a business more sellable are from the Value Builder SystemTM. We speak a lot in our blogs about the 8 drivers of business value and this is where they stem from. You can request a copy of our guide to these drivers here.
We firmly believe that these 8 items are those which business buyers are evaluating when considering if a business is attractive to them. Having a sellable business on your side means it is attractive on their side.
Get in touch if you’d like to discuss how to give your business more sellability.