When you decide to sell your business, you will want to receive a price that rewards you for the time and hard work put into its success. Ideally enough money to fuel the next chapter of your life – whether it is retirement savings or seed funding for a new venture.
Although the aim will be to get as much as possible, your business’ value won’t always match the figure in your head. Many factors determine your business’ worth, some outside of your control.
To get the most from the sale of your business, you must take steps to maximise its value. We’ve listed our top nine tips for improving value so you can sell your business at a fair price.
Understand your current value
The first step to maximising your sale value is understanding where it already is. Doing so will allow you to see how your current valuation aligns with your expectation.
The best way to determine your value is to get a third-party provider to conduct an independent valuation. If you want a second opinion, you may ask more than one company.
It’s also worth considering the factors that make up its value so you can understand why you have received the figure and where there’s room for improvement.
Settle any liabilities or debt
One factor that impacts your valuation is liabilities, including long term debt. These detract from your overall value.
Every company needs liabilities (trade creditors and the like) to operate, so you will never remove them altogether. However, to maximise value, you should aim to minimise them.
Settle outstanding debts and pay your pre-agreed commitments promptly to prevent them from leading to further liabilities.
Become an industry leader
Another way to improve value is to become a leader in your chosen industry. Leading companies are more likely to generate higher sales volumes, retain customers and have a favourable brand reputation.
It will also make you more attractive to potential buyers, including competitors who want to overtake your brand or those looking to enter the market.
Aim to provide value to your customers in ways your competitors can’t – for example, through stellar customer service or innovative products. This will allow you to dominate the industry.
Improve cash flow
Your cash flow reflects inflow and outflow of money within your business. Positive cash flow is a sign of financial health, showing that your business can meet financial commitments, has good revenue and less risk of debt.
A financially strong company will also be far more appealing to prospective buyers, so positive cash flow helps to drive your value.
Tips to boost cash flow include effectively managing costs, removing unnecessary expenses and having a sensible price model.
Attract more customers
Another crucial tool to attract buyers to your business is your customer base. Any buyer will be looking for a company with a solid customer base that indicates a good spread, steady income and demand.
Having high-value customers and contracts will also make you appealing to competitors and other buyers who want to grow their market share.
Here are a few tips to strengthen your customer base:
- Generating leads through a strong marketing strategy
- Pursuing high-value contracts or bids
- Diversifying your audience by targeting new or niche markets
- Creating loyalty schemes that encourage your customers to refer new customers
Improve brand reputation
Brand reputation impacts your desirability to buyers. It’s not easy to build a positive brand reputation, but having one is key to growing your customer base and improving your market position.
Reputation-boosting tactics include consistently providing outstanding service, maintaining strong customer relationships, utilising positive press opportunities and listening to feedback about how you can improve (such as through customer reviews and surveys).
With a better reputation, you will have an additional reason to compel buyers and even encourage them to pay that little bit extra.
Work with an advisor
Sometimes, the key to getting the right price is ensuring you create the perfect conditions for sale. This includes marketing your business effectively, targeting the right buyers and meeting all the necessary criteria.
Working with a trusted business advisor will help you secure your company ahead of a sale and follow the correct steps. They can identify quick fixes that will increase your value or identify potential issues that could deter a buyer.
They will also identify the best route for a sale so you find the best buyer and price.
Lower expenses
Profitability is a vital indicator of success. A profitable business will naturally engage buyers, as it suggests there is worth – including market demand and stable operations.
However, to be profitable, you must be able to manage your expenses. High overheads and costs eat into your profit, impacting your ability to invest internally and maintain cash flow.
Aim to get on top of your costs ahead of a sale to grow your profit margins. The higher your annual profit, the more appealing you will be to buyers – and the more they may be willing to pay.
Empower staff
Your business assets are crucial to your value. Although assets generally refer to your premises, equipment, machinery etc, it also includes your staff.
A company with a strong and loyal workforce will draw in a buyer, especially where there is a management structure in place for post-sale. It will be a massive positive if you can prove you have the necessary skills in your business to operate efficiently, alongside excellent management.
Invest in your staff to get them to this point. Training and upskilling are integral to developing your employees and driving productivity. It’s also likely to boost staff retention and satisfaction, another plus for a buyer.
Conclusion
The key to maximising your sale value is fulfilling your potential and ensuring the most attractive conditions for a buyer.
By understanding the factors that impact your value and the issues in your company that may lower it, you can make a plan to boost your value ahead of a sale. You will then enjoy a price that rewards your hard work over the years and allows you to leave the company happily.
If you are considering selling your business and need advice, Pegasus will help. We work with you to maximise your sale and get the best deal while protecting the company’s legacy. We also guide you through the selling process.