5 Ways To Add Value To Your Business For A More Successful Business Sale
Many of the questions we get asked in regards to selling businesses involve some form of value building and what companies are worth.
Typically, a prospective business buyer will want to see four key areas of your business for sale that are optimized to their tastes.
- OWNER DEPENDENCY
- CASH FLOW
- GROWTH / OPPORTUNITIES
- CURB APPEAL
In order to make sure each of these areas are as optimized as possible, here are 5 ways to actually boost the value of your business in the marketplace, and make it more appealing to potential buyers.
CLEAN UP YOUR DATA
The value of your business depends heavily on your location, comparable businesses sold, industry, and cash flow. Determining these details often involves diving through piles of paperwork and years of tax returns. Getting all of your documentation in one place, and digitizing it, will not only help you with your business’ organization, but also in determining the true value of your business from professionals. It is important not only to gather financial documents, such as tax returns, balance sheets, & statements, but you should also get together the data that involves understanding who your customers are, where they come from, how you get new customers, what systems you use to operate your business, and how heavily your business relies on you. Getting the most value out of your business is often determined by proper presentation of items that buyers really want to see, so that they can make a solid decision on the potential of your business.
STREAMLINE YOUR MARKETING
Depending on the circumstances leading to the sale of your business, you may be able to attract more qualified buyers based upon how your business is perceived in the market. Businesses are sold much like real estate – you wouldn’t pay a premium for a new home if you have to put work into it. If your business is growing and has marketing in the bag, then you can expect to see buyers lining up to take a look at it. Most buyers today will not pay above industry averages if the “curb appeal” of your business isn’t up to par. It’s time to take a look at how your business attracts, keeps, and takes care of its customers. This can involve getting a website that actually works and looks good, refreshing your branding, updating your sales processes, asking your happy customers for testimonials and reviews, and getting rid of all of the marketing that simply doesn’t return money back to you. Sell when the perceived value of your business is at its highest. If you have just secured a great client or received some good press coverage, now is the time to sell, but make sure the curb appeal of your business matches its performance.
GET RID OF NON-ESSENTIALS
Every business spends money, you might be thinking that is a fact that everyone knows. However, nearly 90% of all small businesses in the US never achieve profitability. The second part of that fact is that most businesses don’t know how to spend money. When a potential buyer looks at your business, they are going to want to know what it takes to operate that business as if YOU were gone, and THEY were there. This means getting rid of all of the expenses that aren’t absolutely necessary to operate and grow your business. The more you have to get rid of, the more difficult it is for a buyer to see value in your business. Time to make a list and look through your finances. Your insurance could be costing you more than what it’s worth, you may have some lingering subscriptions that need axing, employees who get paid to do nothing, personal expenses that need separated, inventory that needs to be sold, etc. Not only will this help the overall health of your business, it will also lower the chance of a buyer seeing more risk than there really is.
OPTIMIZE YOUR SYSTEMS
What systems and procedures does your business rely on to operate? If the answer is just YOU, then you will not have much luck in selling your business. In most business purchases, the current owner (you) doesn’t go with the business. There are certain situations where it is negotiable, however, getting systems and procedures into place that are repeatable, teachable, and automated will boost the value of your business significantly. Does your business rely heavily on pen and paper, forms, and on-the-spot pricing? Time to change that. There are thousands of options to streamline and automate your business procedures. These can include marketing, sales, reporting, tracking, invoicing, payroll, time tracking, and more. If a high proportion of any part of your business comes from a single source, such as you, or one employee, then a potential buyer will see that as an issue. Build your business upon a foundation that is as steady as possible, that way, should one part of it fail, the business itself doesn’t. The more your business operates like a well-oiled machine, the greater the chances are of you selling it for the highest value possible.
DEVELOP A PLAN & FOCUS
Those who fail to plan, don’t have a plan. Potential buyers want to see that your business has been operating off of measurable plans and goals. If you don’t have one, now is the time to get that together. Where would you want your business to be next year, or in five years? What if your largest customer decided not to do business with you anymore? Now is the time to start diversifying your revenue streams, figuring out faster ways to get things done, and focusing on milestones that improve your business to offer more cash flow and a return for a potential buyer. Potential buyers will ask you what the risks are, who are your competitors, what additional products and services can be offered, and where will your business be in years to come. Be ready for these and more by developing a focused plan to improve every aspect of your business possible.
IAG can help you with all of these aspects, including the development and implementation of actual solutions that can boost the value of your business and optimize it for results in the market.
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