When you are planning on selling your company, you will be expecting to get the highest price available. However, without some effort and work, you may be surprised at the prices you are offered.
If you are planning an exit from your company, it is essential that you start the process of raising your company’s value in advance to elevate your company’s worth before you try to sell your business.
Here are 11 ways to make your business more valuable.
1. Offer Innovative Products
Research and development is an essential way to increase your company’s value, that is often overlooked or ignored. New products are what makes the economy grow and in such can do the same for your company by showing buyers that this is what they can expect.
2. Have a Diversified Customer Base
Prospective buyers want to see a diverse customer base. They begin to worry if one or two customers make up more than 10% to 20% of your total revenue. They know that in these cases losing one or both of these major customers would mean a significant loss for the company as a whole.
3. Make Sure You Have Recurring Revenue
Having recurring revenue shows your prospective buyers that buying your company would be a good choice. It signals the possibility for profitability and in turn growth.
You can use subscription services to maintain a steady revenue source. Businesses with a large number of long-term subscription sales show more potential and can often surpass their competitors due to their following.
4. Have a Business System in Play
A business system is essentially the blueprint to the running of your company. You want to be able to show prospective buyers that your company will continue to run as smoothly when you are no longer there as it does with you running things.
Have written instructions on all of the procedures for the running of your company. Make sure that they are understandable and teachable. Make sure that your potential buyers know that this system is already in effect and will continue in the same manner without you there to oversee it.
5. Generate and Maintain Growth
Buyers are looking for a good company and want to see potential in what they are buying. Maintain growth by looking for options that sell more for less money as opposed to selling less for more money.
In the end, it will pay off. By having and maintaining a steady growth pattern, you will give your potential buyers the confidence that they can expect to see the same kind of growth.
6. Provide a Unique Product
You need to show your future buyers that you have a unique product that can not be easily copied. It is wise patent your intellectual property and unique offerings, allowing your company to attract higher-paying buyers.
7. Find a Way to Get Employees to Stay
Potential buyers are likely to pay higher prices for your company if your employees stay with the new company. Employees are most likely to stay if offered incentives and assurances after the new owners take over.
8. Own Tangible Assets
Owning the tangible assets needed for the daily running of your company can increase the price your potential buyers are willing to pay. Owning daily necessities generally costs less than renting. Evaluate your needs and speak to an advisor to see if owning or renting critical assets is the better choice.
9. Make Your Assets Shine
Aesthetically pleasing buildings and equipment will typically bring a higher price from prospective buyers. Invest in repairs and new paint to brighten up your offerings, including new furniture if the existing is dated and worn.
10. Evaluate Your Debt
Prospective buyers are going to look at the financial health of your company. For this reason, it is important to evaluate your debt-to-capital ratio and ensure that it is within the industry standards. Talk with your bankers about the routes you can take to lower your debt-to-capital rate, making a better investment outlook for potential buyers.
11. Protect Intangible Assets
You want to protect the intangible assets of your company and ensure that your employees, customers, and business relationships do not suffer before, during, or after the sale. Maintaining these assets will inspire higher prices from future buyers.
Putting in the effort and work before you list your company for sale will give you better results when it comes time for potential buyers to start their offers, making the reality of your offers more lucrative and less of a surprise.
For more information, check out the infographic below provided by Denver Business Brokers.
Learning how to value your business can also be a great asset at your disposal. Sure, you can consult a business broker to evaluate the business for you, but having an understanding on how to value it yourself can give you an idea on what numbers to expect when you decide to sell it.