6 Ways to Increase Your Business’s Value Before You Sell

As a business owner, there may come a time when you’ll want to sell your company. Before you do so, it’s important to make sure that you will get the most value out of all the hard work that you have put into building your business. There are many things to think about before listing it for sale. At the forefront of your mind should be thinking about how to increase your business’s value. Here we discuss some of the best ways business owners can positively affect the value of their business.

 

  • Improve your margins

 

The overall goal should be to do more with less by focusing on your gross margins, which are the differences between revenue and costs. The bigger the gap between sales price and production costs, the more it signals that you have an efficient and profitable business. There are several ways you can go about this, such as reducing overhead by cutting unnecessary staff or amenities or investing in key processes that make your company more efficient.

However, this is not a short term solution and is something to start sooner rather than later. Increasing profits and efficiency does not happen overnight, so if you’re thinking of selling, it’s best to get started right away. Also, be sure to track your progress so that you can visibly present your growth to prospective buyers.

 

  • Keep employees on board

 

New owners will want stability so that they can continue to generate profit. One way to do this is by keeping your key employees on board. Having loyal staff increases your company’s worth, especially if you have committed employees willing to stay on after you leave. To accomplish this, you might build long term incentives for them like equity ownership or create bonus plans that are tied to profits. This will motivate your staff to keep working hard even after you depart.

 

  • Have a long-term plan

 

Buyers are more willing to pay top dollar if there is a clear, long-term road map that will lead to higher profits in the future. You’ll need to provide all of the information a seller may need so that they can see how successful your business will be in 5, 10, or even 20 years from when they purchase it.

 

  • Diversify your customer base

 

Buyers are typically looking for a customer base that is diverse, because this protects the company from the loss of any one major customer. For example, if your two top customers generate 30% or more of your sale, then a buyer would be very concerned over what would happen if one of those customers were to exit at the same time you did. By keeping your customer base diverse, you improve the value by showing that despite any minor setbacks, your company is still a great investment for any buyer in the long term.

 

  • Clean up your business

 

You want to make a strong first impression to any buyer and often, a simple walkthrough of your facilities is enough to make or break it. Clean up your office by doing any renovations or touch ups that may be necessary. Simple things such as a fresh coat of paint or new desks can go a long way to improving the value of your business in the eyes of the purchaser.

  • Run your business like a franchise.  

When people think about franchises, they usually identify with the franchise logos and products/services that the franchise sells.  The real advantage to franchises, however, is the systems that run the individual businesses.  How many things happen in your business because you as the owner “knows” it is supposed to happen?  If all aspects of your business were tied to systems and written processes, then the buyer will get much more value in acquiring the business and likely pay more for the business.  Franchises run according to an operations manual.  With an operations manual that covers every aspect of your business, the buyer will always have a written resource to turn to when he/she has questions as the buyer takes over and operates the business.    

Selling your business is a huge step to take as an entrepreneur. You not only want to make sure your profits are at their highest but also that it will be going to the right person who will continue to make it even more of a success. The Wilson Law Group has over 25 years of experience helping clients buy and sell businesses. Jim Wilson will personally work with you to make sure your business is in top shape for sale. If you own a business and are thinking of getting it ready to sell, contact the Wilson Law Group today to see how we can help you get ready for the next step.

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Wilson Law Group

Jim Wilson is the founder and principal attorney of the Wilson Law Group. For the past 25 years he has been combining legal dexterity with an entrepreneurial mindset to help aspiring and established business owners start, finance, buy, sell, and run their companies.

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