If you have made the momentous decision to sell your business, then you are probably keen to get the highest possible return on your investment – within reason, of course.
Part of the process of preparing your company for sale includes getting a valuation. This will give your prospective acquirers an accurate idea of the market value of your business. If you’re concerned about the results of the valuation and how much your business is worth, this can be a significant source of stress as you begin the lengthy preparations for passing on the corporate torch.
Fortunately, there are several things you can do to boost the value of your business before the sale. These include:
- Ensuring you have a strong team in place
- Enhancing your cash flow processes
- Demonstrating growth and potential
- Diversifying your portfolio
- Reviewing your documentation
- Clearing liabilities
- Providing evidence of customer satisfaction
In this helpful guide, we’ll delve deeper into each of these key points, to give you the best possible chance of boosting your company’s value in the runup to the sale.
The importance of a good team
One of the aspects of your business that prospective acquirers will be scrutinising before they opt to buy is the strength and expertise of your team, and whether key members will be staying on for the transition.
After all, the business needs to function just as well without you. This means having a skilled and experience team in place – particularly at management level – to handle the handover period with as little stress as possible.
Don’t forget that your team is a vital business asset, just as much so as your property, inventory, and IP.
Review your cash flow
If your cash flow processes are ineffective, this can be a serious sticking point for potential buyers and can detract from the value of your business.
To tighten things up, there are numerous effective strategies you can employ, such as:
- Implementing more precise costing of your products or services.
- Chasing up late-paying clients and introducing a more stringent process for evaluating whether new clients are ‘credit worthy’.
- Finding ways to reduce your overheads.
- Keeping a careful stock inventory to avoid overstocking.
These are just a few of the tried-and-trusted methods available to boost cash flow and increase the value of your company.
Demonstrate growth and potential
Many prospective acquirers will be interested in businesses that have shown significant growth since their inception, as this indicates that further growth is highly likely. If your financial records can reveal this kind of growth, then your business is more likely to have a higher valuation. Furthermore, if you’ve already put together some clear plans for increased growth, all the better.
You should also be able to provide sales projections for the coming financial years that can give your potential buyers a clear picture of where your business is heading. Having strong projections will be another great benefit when it comes to evaluating how much your business is worth.
Consider diversification
While it can be a very positive thing to occupy a specific niche and offer a specialised product or service, it can also expose you to stagnation if there comes a time when your offerings are not in high demand.
Consequently, it may be good idea to focus on diversifying your offerings in the lead-up to a sale.
To help you, consider the services or products you already offer and think about any related offerings that your clients may appreciate. Conduct some market research to help you establish which new offerings are most likely to perform well and appeal to your customer base.
Get your paperwork in order
An essential step you should take in preparation for the sale of your company is to review and organise all your paperwork – from property and equipment leases to employee contracts, existing patents, and, of course, all your financial documentation.
A company with poorly organised paperwork – or, even worse, gaps in documentation – will not be looked on favourably by potential acquirers.
Settle your liabilities
Settling your liabilities pre-sale is a crucial step for any business owner to take, as it will significantly increase the appeal of your company. After all, it stands to reason that no one wants to purchase a business that has outstanding debts or that is in any kind of legal bother; the associated risks would be too great.
To help with this process, itemise all your liabilities and go through them systematically, beginning with the most substantial debts. You can also reach out to suppliers and ask to renegotiate your payment plans if you need a little leeway.
Demonstrate client loyalty
A business with a strong base of loyal clients is going to be more attractive – and more valuable. Demonstrably high levels of repeat business will show prospective buyers that there is less risk involved in purchasing your company, as your clients are clearly pleased with what you have to offer.
It’s recommended that you reach out to your clients and encourage them to leave positive reviews and testimonials online that demonstrate how valuable your offerings are.
How to value a business
Now you have an arsenal of strategies and techniques to boost the value of your business, it’s time to think about the valuation itself. You’re probably keen to answer that vital query: ‘How much is my business worth?’
There are several different methods you can use to value a business, but arguably the simplest and most effective method is to hire a business broker.
Not only can they help you with a valuation, but they can also take over every stage of the sale process, from contacting possible buyers to assisting with due diligence and negotiations.
Contact Harris Acquire today
Harris Acquire is a tried-and-trusted business broker with a wealth of experience in the M&A world. We pride ourselves on helping buyers and sellers find the best possible deal with the least amount of stress.
If you’d like to discuss selling your business, do give us a ring on 01926 757100 or send an email to Hello@harrisacquire.com and one of our team will be in touch in no time.