How to Increase Business Value Before Selling
When planning to leave or sell a business, remember there are specific steps to take and planning is crucial. Most business owners invest a lot of effort and passion into growing their ventures. But, when selling becomes the goal, getting the highest value for the business is essential. If you're thinking of selling your business, here are some tactics to increase its value:
1. Create an Exit Plan
Many believe an exit strategy is just about leaving a business. But it's more about deciding how and when you leave. You should start by getting expert advice to ensure the best deal for you. From there, pinpoint your goals and set the right expectations. A solid exit plan shows potential buyers they're getting a business with direction, even without the original owner.
2. Delegate Management
To ease this concern, create a strong management team and share responsibilities. Doing this proves the business can run well even without you. Companies that can stand on their own appeal more to buyers since they offer stability and reduces risks during transition.
3. Diversify Your Client Base
Relying heavily on a few major clients can be extremely risky. If one client were to leave post-acquisition, it could significantly impact the company's revenue. Therefore, diversifying your client base is crucial. By ensuring that no single client accounts for more than 15% of your revenue, you can offer potential buyers confidence in a stable, diversified income stream.
4. Plan and Execute a Growth Strategy
A proven growth trajectory can significantly boost the value of a business. However, sporadic growth won't cut it; potential buyers want to see a consistent and sustainable growth strategy. Whether it’s expanding into new markets, introducing new products, or buying a competitor, a well-executed growth plan with up-to-date stats is an indicator of future profitability.
5. Have Financial Control and Reporting
A business that has its finances in order is more appealing to potential buyers. Ensure you have clean financial statements, preferably audited, for the last few years. Regularly updated books show that the business has a keen eye on its financial health, making it a safer bet for buyers. Efficient reporting mechanisms also allow potential buyers to analyze profitability, cash flow, and other critical metrics easily.
6. Invest in Assets
Physical and intangible assets can significantly increase the worth of a business. For tangible assets, consider upgrading equipment or purchasing property. These not only add direct value but also can enhance operational efficiency. Intangible assets, such as patents or trademarks, can also elevate your business's standing in the market, making it more attractive for a buyer
Increasing the value of your business before selling requires strategic foresight and timely execution. It's about presenting potential buyers with a vision of growth, stability, and profitability. By adopting these measures, you're not just boosting the monetary worth of your business but also ensuring its sustained success in the future, even under new ownership. When you're ready to sell, these efforts will be reflected in the price tag and the speed at which you can close a rewarding deal.
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