6 Tips For Increasing the Value of Your Company
Concrete steps you can take to attract a buyer and get more money when you sell.
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When it comes to getting maximum value for your company, you want to be the one who makes things happen, not the one things happen to.
If you’re like most entrepreneurs, your business is your single biggest asset and taking the time to plan how to properly sell that asset for maximum value, or any other factors that are important to you (e.g., what happens to your employees), is vital to achieving your desired outcome.
BONUS TIP: Start planning a couple of years in advance, so you have time to make the adjustments that can have a real impact on your company’s value. For more details, see our infographic, “9 Steps to Selling Your Business.”
Positioning is important. You don’t want to attract the buyer that looks for distressed assets or low-cost opportunities.
Instead, you want to attract the buyer that aims for the movers and shakers and industry leaders in order to further its own brand’s market position (real and perceived).
If you don’t have a public relations (PR) plan in place, start putting yourself on the map a couple of years before you plan to exit.
Announce wins, partnerships and milestones.
In short, publicize any deal that points to a growing sales pipeline. And if you’ve got a high growth rate, make it known – even if you keep the details to yourself, potential buyers will get your message!
BONUS TIP: Make sure you get a PR firm that knows your space and also works with investment clients, so you’re speaking the right language to all parties.
Customer attrition impacts every aspect of your company – your profitability, your gross margins, your purchasing power and even your growth rate (because you add to instead of replace customers).
Beating the industry average customer-retention rate can move you to the higher end of the valuation spectrum because your cash flow is more predictable and a potential buyer will earn more money over the life of the transaction.
BONUS TIP: If you’re outperforming the buyer in customer retention, the buyer can adopt your processes to improve retention across the entire company.
Make sure you communicate that you’ll help the buyer develop best practices in their company, as well as your own, during the post-deal transition period.
Many small business owners structure their companies and operations around driving personal income.
In order to maximize the value of your business, you need to take the time to convert your company into a profit-generating, sales-oriented asset that will attract many potential buyers.
Clean all that up and help the buyer see the “real” profit from the acquisition.
BONUS TIP: Personal income includes lifestyle expenses, such as family vacations and dinners, etc., that won’t transfer to another entity that isn’t a sole proprietor small shop.
Clean that up and help the buyer see the “real” profit from the acquisition.
Even if you’re the world’s greatest negotiator, the benefits of using business brokers usually outweigh the costs of their involvement.
For starters, they can hide your identity and contact buyers through a blind profile.
In addition, they often can get a fairly strong bead on the value of your business without or before a formal valuation appraisal.
And, of course, they can reach larger pools of buyers.
This is all they do every day so they’re good at it.
It’s generally accepted that business brokers increase the value of your transaction by more than they cost you in fees.
BONUS TIP: Using a business broker frees you up to keep growing and preparing the business for sale while they shop the deal.
If you’ve been involved in mergers or acquisitions before, there’s a good chance you’ve heard that the key to a lucrative exit is to build for the long-term but to exit early.
Your decision to sell your business doesn’t mean you should stop focusing on sales.
If anything, you should do everything you can to ramp up your sales activities so potential buyers can see growth potential from the deal, not just a declining pool of revenue.
And they’ll pay more for it.
BONUS TIP: Don’t forget to promote any major distribution deals you get (see Slide Two) so potential buyers put your firm on radar.
If you’ve been involved in mergers or acquisitions before, there’s a good chance you’ve heard that the key to a lucrative exit is to build for the long-term but to exit early.
Your decision to sell your business doesn’t mean you should stop focusing on sales.
If anything, you should do everything you can to ramp up your sales activities so potential buyers can see growth potential from the deal, not just a declining pool of revenue.
And they’ll pay more for it.
BONUS TIP: Don’t forget to promote any major distribution deals you get (see Slide Two) so potential buyers put your firm on radar.
If you’ve been following our series on selling your business this month, including our kickoff column, “Is it Time to Sell Your IT Services Business?” and our infographic, “9 Steps To Selling Your Business,” you already know that valuations in any industry tend to fall into a range.
The goal for any business owner selling his or her business should be to sell at the high end of that range.
However, some factors that impact the value of your business are not in your control. That’s because they can vary with the needs of the buyer.
Literally, beauty, or in this case, value, is in the eyes of the beholder.
Maybe your company is not geographically positioned advantageously to meet the scope and scale requirements of the buyer.
Maybe the buyer will acquire your direct competitor instead of your company. Or maybe you don’t have proprietary business processes or technologies that can drive premium value. Or you don’t have a big brand in your space.
These are a few in a long list of factors often associated with premium valuation for the right buyer.
The good news is there are universal moves you can take to increase the value of your company regardless of (or in addition to) these factors.
Here are six concrete steps you can take to attract a buyer and get more money when you sell.
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