“We’re thinking about expanding the business, but we’re also thinking about selling in the next year or two. Should we still do it?”
It’s a question we get quite often.
Sometimes it’s a new outlet. Sometimes it’s a first move into Malaysia or Indonesia. Occasionally, it’s a new product line that requires a significant investment.
And our starting point is usually simple:
Business as usual.
If you’ve spent fifteen years building a business that works, we wouldn’t tell you to freeze it just because a sale is somewhere on the horizon.
You still have a business to run.
The fact that you may sell in a year or two shouldn’t suddenly mean you stop making sensible decisions today.
But we would ask a few questions first.
Because “should I expand?” can mean very different things depending on what you’re expanding into, how proven it is, and how much time you have before a potential sale.
Two Different Decisions Wearing the Same Clothes
Opening a fourth outlet of a format that has already worked three times is one thing.
Entering a new country for the first time is another.
The first is largely replication.
You know the build cost. You have a good idea of how long it takes to reach profitability. You know what the staffing looks like. You have already worked out the operating model.
The second is a new market.
There may be new regulations, customers, suppliers, competitors, tax considerations and a management structure you haven’t had to build before.
Both get called “expansion”. A buyer may look at them very differently.
A successful new outlet can be evidence that your business has a repeatable growth model. It can show that the business can expand without everything depending on the founder.
A new country may eventually be very valuable too. But until there is a track record, much of that value is still prospective.
That doesn’t make it a bad decision.
It just means you should be clear about what you’re actually taking on.
Four Questions We Would Ask First
- Are you in a rush?
This is probably the first question we’d ask.
Expansion usually has an awkward shape:
The costs come first. The benefits come later.
If you’re eighteen months away from a potential sale, a new outlet might still be absorbing start-up costs when a buyer sees the numbers.
If you’re three or four years away, there is much more time for the investment to mature, generate a track record and become part of the underlying performance of the business.
The same expansion can therefore look very different depending on your timeline.
If you’re not actually in a rush to sell, you have more room to let the business develop.
And that’s important.
You shouldn’t make a two-year decision based on a twelve-month snapshot if you have the option of waiting.
- Do you have the energy to run it?
This one is easy to overlook.
An expansion takes management attention.
So does a sale process.
Once a transaction gets serious, management can expect detailed financial questions, customer and supplier information, contracts, operational discussions and multiple rounds of meetings. Your senior team will be involved. You will probably be involved.
If the same people are also trying to open a new outlet or establish a new market, something has to give.
And the thing you don’t want to give up is the performance of the existing business.
A buyer may forgive the absence of another growth initiative.
They will pay much closer attention if the core business starts to weaken while management is distracted elsewhere.
So ask yourself honestly:
Do I have the capacity to build this properly and still run what I already have well?
- How confident are you?
There is a big difference between proven confidence and hopeful confidence.
If you’ve opened three outlets and each one followed roughly the same path to profitability, your confidence is based on evidence.
You know the model.
If this is your first overseas expansion, you’re entering a market you’ve never operated in, hiring a country manager you’ve never worked with and learning a regulatory environment you don’t know, the confidence is necessarily more of a forecast.
Neither is necessarily right or wrong.
But they carry different levels of uncertainty.
And uncertainty matters when you’re thinking about a sale.
A buyer can understand a growth plan.
What they will want to know is how much of that plan is supported by evidence and how much is still an assumption.
- What are the risks?
Start with the obvious ones.
What if the expansion takes twice as long to break even?
What if costs are higher than expected?
What if it requires more management attention than you thought?
What if the core business suffers because senior people are stretched too thin?
Then there’s another risk that is particularly relevant when you’re thinking about selling:
Does the expansion make the business more dependent on you?
This can happen surprisingly easily.
The founder may be the person who knows the new market best, wins the first customers, hires the first team and solves the first ten problems.
That’s perfectly normal when you’re building something new.
But if the goal is eventually to step away, you should ask whether you’re building a business that can operate without you — or simply creating another part of the business that needs you.
Owner and key-person dependency can affect how a buyer assesses the business and can influence valuation, transition arrangements and deal structure.
What Does a Buyer Actually Do With the Expansion?
This is where the distinction between building the business and preparing to sell the business becomes important.
A buyer isn’t simply looking at your latest profit number.
They are trying to understand the earnings they are actually acquiring and whether those earnings are sustainable. Financial due diligence typically tests the historical drivers of growth, quality of earnings and the assumptions underlying the valuation.
So imagine you’ve opened a new outlet six months before putting the business on the market.
It is losing money.
What happens?
It depends.
If those losses are genuinely exceptional start-up costs and the underlying outlet is already showing a credible path to profitability, a buyer may make an adjustment to understand the underlying performance of the established business.
But if the losses are simply the normal ongoing cost of an unproven operation, a buyer may regard them as part of the business they are actually buying.
That’s an important distinction.
You can’t assume that every new investment will simply be added back because it hasn’t paid off yet.
The same applies to growth.
A buyer may believe the new market has significant potential. They may even be willing to pay something for that potential.
But unproven growth is harder to value than demonstrated growth.
Sometimes the difference between buyer and seller expectations is instead dealt with through the structure of the transaction — for example, an earn-out tied to future performance. Earn-outs are commonly used to bridge differences in expectations around future performance and can also help address situations where the seller’s continued involvement matters.
So there is an important asymmetry to understand:
You fund the expansion. You take the risk. And if it only proves itself after completion, the buyer may ultimately benefit from that upside.
That’s not an argument against expanding.
It is an argument for expanding because the business needs it, rather than because you think the expansion will automatically increase the eventual sale price.
More Valuable Is Not Always More Sale-Ready
This is probably the most important distinction in the whole question.
An expansion can make your business more valuable in the long run while making it harder to sell in the short term.
Both can be true.
A business that has already proven its new outlet, new market or new product is easier for a buyer to understand than one that is halfway through the investment.
The first has evidence.
The second has a plan.
And buyers generally have more confidence in evidence than plans.
This doesn’t mean you should stop investing once you start thinking about an exit.
In fact, the opposite can be true.
You may have several years ahead of you, a proven expansion model and a strong management team. In that situation, stopping a sensible growth initiative purely because you might sell could be the worse decision.
The question is whether the investment makes sense with or without the sale.
So, Should You Expand Before Selling?
Our starting position is usually:
Business as usual.
If the expansion makes commercial sense, fits your risk appetite and you have the time and energy to execute it properly, carry on building.
Don’t run your business around a hypothetical buyer.
But do understand how the decision might look when someone else eventually steps into your shoes.
If you’re opening a fourth outlet because the first three have worked, that’s a very different proposition from opening your first overseas operation six months before a sale.
And if you’re considering the expansion purely because you think it will increase your valuation, we’d pause.
Because the right question isn’t: “Will this make my business more valuable when I sell?”
It’s: “Is this still the right thing to do for my business today?”
If the answer is yes, keep building.
A buyer can benefit from what you’ve built too.
Key Takeaways
- Separate replication from experimentation.
A proven expansion model gives a buyer evidence. A new market or untested product is a different proposition and carries more uncertainty. - Look at the timeline.
Expansion costs money and management attention before it produces results. The closer you are to a sale, the more important that timing becomes. - Protect the core business.
Don’t let a new growth initiative weaken the business that already pays the bills. - Watch your own dependency.
If the expansion makes the business even more reliant on you, think carefully about whether that helps or hurts your eventual exit. - Don’t expand for the buyer.
If the investment makes sense for the business regardless of whether you sell, that’s a much stronger reason to do it.
FAQs
Should I stop investing in my business if I’m planning to sell?
No.
Thinking about selling doesn’t mean putting the business into “sale mode”.
The better question is which investments make sense for the business, given your timeline, risk appetite and management capacity.
A business that has stopped investing in sensible opportunities isn’t automatically more attractive to a buyer. At the same time, not every investment will increase sale value. The key is understanding what you’re investing in and whether you have enough time for the results to become visible.
Will opening a new outlet increase my business valuation?
It can.
If the outlet follows a proven model, reaches normal trading performance and demonstrates that the business can replicate its success, it may strengthen the overall growth story.
But a new outlet that is still loss-making or unproven when you go to market may not receive full credit for its potential. A buyer will want to understand the underlying earnings of the business and the evidence supporting future growth.
Is expanding overseas a good idea before selling a business?
It can be, but it is usually a more complex decision than opening another outlet in a market you already understand.
A new country can introduce additional entities, regulations, tax considerations, customers, suppliers, management requirements and diligence work.
The more time you have to establish the operation and demonstrate that it works, the easier it becomes for a buyer to assess what they’re actually acquiring.
How far ahead should I plan an exit?
There isn’t a single number that works for every business.
But many of the things that can improve an exit — reducing founder dependency, strengthening management, improving reporting and documenting key processes — take time to become visible in the business.
Starting earlier keeps your options open.
It means you can prepare for a sale without committing to one.
Will a buyer pay for growth that hasn’t happened yet?
Possibly, but usually with more caution than they would apply to demonstrated growth.
A buyer may recognise the potential of an expansion, particularly where there is strong evidence behind the plan.
Where buyer and seller have different views about future performance, part of the consideration may instead be structured around future results through mechanisms such as an earn-out.
The important point is not to assume that a buyer will pay today for results that have not yet been demonstrated.
Thinking About Your Own Exit?
You don’t need to be ready to sell to start thinking about how a buyer might see your business.
The Maven Co. helps business owners understand what may affect value and saleability before they make major decisions about growth, investment or succession.
We offer a confidential, no-obligation exit-readiness conversation for owners who simply want to think through their options.
Sometimes the answer is to sell.
Sometimes it’s to keep building.
And sometimes, the most useful thing is simply knowing the difference.
