Are you contemplating selling your business in the next year or two? The key to maximizing your sale price lies in taking proactive steps now. Wondering how to elevate the value of your business? Just like any journey, you need a starting point. Begin with an objective assessment of your business’s current value – not based on intuition, friends’ opinions, or even your accountant’s insights.
Initiate the process by establishing a Benchmark or Broker’s Opinion of Value. Engaging with a seasoned Business Broker with a deep understanding of the business sale landscape is a smart first step. An industry-credentialed broker will conduct a comprehensive analysis of your financials and overall business operations to determine a likely sales price range. Armed with this benchmark, you can strategically work towards meeting your exit objectives.
Now, let’s debunk a prevalent myth that has misled sellers for years. The notion that your business is worth a certain amount due to your past efforts and sacrifices doesn’t resonate with buyers. The majority of a business’s value (80%) is rooted in its financial performance over the past three years. The remaining 20% encompasses both hard and soft factors, such as customer concentration, competitive landscape, staffing, organization, processes, and market presentation.
Recent Financial Performance:
Buyers gravitate towards businesses showcasing consistent growth in revenue and profit over the last three years. Any downturn in this period introduces uncertainty, potentially prompting buyers to reconsider or negotiate a lower price. Analyze your performance, document the peaks and dips, and work with your broker to address and mitigate perceived risks.
Future Financial Performance:
To boost business value, focus on increasing both revenues and profits. Scrutinize expenses, trim personal costs, and create a strategy that concurrently elevates revenues while reducing unnecessary expenditures. The goal is clear – increased profits translate to a higher selling price.
Customer Concentration:
Safety lies in diversification. If a significant portion of your revenue depends on a handful of customers, it’s time to attract and retain more. Reduce dependency on singular clients, thereby fortifying your business against potential downturns.
Competitive Landscape:
Acknowledge your competitors objectively. Rate them without bias, recognizing that successful businesses are born from available market opportunities. Learn from your competitors; if they seem more efficient or successful, take steps to level the playing field. Monitoring competitors closely can lead to invaluable improvements in your business.
Staffing and Organization:
As your business grows, so should its organizational structure. Avoid a flat hierarchy where every aspect funnels through the owner. Introduce a management hierarchy to maximize efficiency. If your business can function seamlessly in your absence, you’ve built a team capable of sustaining itself – a significant confidence booster for potential buyers.
Process and Procedures:
Document every facet of your business operations, creating an Operations Manual or Handbook. This not only provides a roadmap for success but enhances operational efficiency. A comprehensive guide improves profit margins, making your business more attractive to buyers.
Presentation:
First impressions matter. Audit every aspect of your business – from its physical appearance to customer experience. If you and your staff aren’t proud of every aspect, include it in your improvement plan. Seek objective opinions from your team; they’re eager to contribute to enhancing the business’s overall appeal.
As you navigate these action items, keep in mind that appearances count, and creating a business that shines bright in the market will not only increase its value but also make the selling process smoother.
At Vossmosis, we specialize in elevating the value of businesses for successful sales. Our focused and proven process ensures urgency, tenacity, and brings buyers and sellers together seamlessly. Connect with us at 602-740-4638, mark@vossmosis.com or visit our website at https://vossmosis.com/ to set your business on the path to increased value and a successful sale.
