Selling your business? 7 steps to increase its value
Read time: 3 minutes
Selling a business is a major challenge for entrepreneurs. Besides the complexity of the process and emotions involved, entrepreneurs need to make sure they maximize the value of the business they've put so much effort and time into building.
Making cosmetic changes to a company at the last minute before putting it on the market is a recipe for disappointment.
Planning and preparation for a transition is the way to go and entrepreneurs need to take the time to do it right.
1. Seek advice
You should work with an experienced outside advisor who can help you prepare your business for sale, including having an expert valuation conducted.
Selling your business is one of the most important moments in your life as an entrepreneur. Professional advice will help ensure you get it right.
2. Work to boost your profits
Don’t expect high offers if you’re only breaking even.
You also don't want to take too much money out of the business. Good retained earnings on your balance sheet—the portion of the net income that hasn't been distributed to the shareholders—indicates to buyers that the business has been profitable and is healthy.
3. Increase sales and lower expenses
Analyse your processes and look for ways to increase operational efficiency, cut costs and control inventory without affecting your operations. Brush up your marketing plan and find ways of boosting sales including tapping new markets or offering new products and services.
Focus on creating a diversified customer base that, ideally, generates recurring revenues.
4. Continue to invest and improve
One of the biggest mistakes business owners make is to take their foot off the accelerator after deciding to exit.
The moment you stop investing in new equipment, maintenance and process improvements is the moment you start reducing the future value of your company.
5. Create a strategic plan
A formal plan that presents measurable goals and milestones for the coming years will give your business credibility as a growing concern with long-term potential.
6. Develop repeatable processes and empower your people
The processes in your business need to be repeatable and teachable, advises John Warrilow in his book Built to Sell: Creating a Business That Can Thrive Without You. "If your business can't function without you, you will have a hard time finding a buyer," Warrillow says.
Also, train, motivate and empower your people. Pay particular attention to the management team. Work to solve any internal conflicts and strive to keep employee turnover rate low. A strong, professional team adds value to the business—especially in companies with few tangible assets.
7. Stand out from the crowd
In many ways, selling your company is a marketing challenge of its own. That's why it's important to showcase to potential buyers whatever differentiates your product or service from the competition. Ask some of your long-time clients for testimonials explaining why they are doing business with you and what keeps them coming back.
Regardless to whether you actually go through with a sale, these tips will help you build a stronger, more efficient and valuable company.