It’s a bitter-sweet moment when you get to that time in your life when you need to sell your business, especially if you built it from the ground up. In the end, whether you’ve built your business from scratch or bought the business to flip it, you’ll want to get the highest possible market value for it, won’t you?
It’s easy to look at our businesses and base their worth on the effort we put into them. Unfortunately, market value can often be less than we were hoping for. You have the power to change that, though! Before your business goes on sale, here are some tips to help you raise its market value.
1. Hire a broker
The first thing we recommend is hiring a business broker or a corporate advisory specialist to help you value your business and create a strategy to improve it so you get a better price for it. Selling a business requires a lot of time and administrative work. Most business owners struggle to juggle running their business while organising its sale.
This is where business brokers come in. Apart from advising you on changes that’ll make your business more appealing when marketed, they’ll walk you through all of the paperwork, market the business to their network of investors and the rest of the market, vet potential buyers, and negotiate for the best price possible for you.
2. Put in the effort to increase sales
When you’re preparing to sell your business, potential buyers who’ve shown interest will want to see the business’s financial history, weighing up its history and current profits. This plays a significant role in how much your business is worth. Remember, business sales take time, so, as soon as you know you’ve decided to sell, kick your efforts into fifth gear to boost your sales so that your sales show a gradual increase over each financial year. How you do this is completely up to you. You may need to provide more incentives for employees or create a new product or service.
3. Invest in marketing
Making your company stand out as distinguished amongst others in the industry is a great way to attract attention and get a better price for your business. To do this, you’ll need to invest a considerable amount into marketing. You don’t need to break the bank, but having a well-defined brand will make a huge difference when your business valuation is done.
4. Consider your client’s concentration risk
Assess your customer basis and where or who your main revenue streams come from. Many business relationships are built over time because of the relationships between the individuals in the business. When a sale happens, these relationships might not be as strong, and some clients may move. This becomes problematic when a client who moves brings in most of the business’s revenue. We can’t control people’s decisions, but you can bridge the gap between this client and the new owner by introducing them and allowing them to develop a relationship, too. Maintaining clients is essential to increasing your market value.
5. Do you rely too heavily on one supplier?
The same goes for your supplier. Over time, you might also build a good relationship with a supplier, and as a result of that relationship, they will offer you a better price on the goods you purchase. However, when the business sells, they revert that price to their actual price. This could create tension between the new owner and the supplier.
Also, if you’re relying too heavily on one supplier and they up and leave as a result of the sale, the new owner is now in a tight spot. These are red flags that potential buyers will look for.
6. Reevaluate business operations
How the business performs is often shown in its profits. That said, you might be able to increase your profits by working smarter and not harder. To do this, reevaluate your business operations to see where you can make things more efficient. Consider offering employee training and equipping them with the ability to do they’re jobs better. Ultimately, by doing this, you’ll increase the productivity of your operations and boost your profits, which, as we’ve already mentioned, could boost your business’s market value.
7. Encourage employee retention
Employees are an asset to a business and will definitely be factored in when you sell the business. During a sale, many employees feel unsteady and unsure about the future. Some might consider leaving, too. Encourage employee retention by reassuring them that their jobs are secure and that any changes the new owners make will benefit the business. You might want to include incentives, like we said earlier. Introducing them to the new owners and going through a phasing-out period might help them adjust, too.
Final Thoughts
After investing so much of your time and financial resources into your business, it’s understandable that you’d want the best return on your investment possible. However, getting the best return requires one hard push at the end to make your business look as appealing to potential investors as possible, and we’re not just talking about it at face value! Your books need to reflect this value, too. Follow the tips above, and you’ll stand a better chance of increasing your business’s market value!