If you’re a small business owner, you’ve probably thought about selling your business at some point, especially if things haven’t always been going your way.
Besides, it’s a logical next step once you’ve reached a certain level of success. But before you put your business on the market, there are a few things you can do to increase its value.
How is value different to growth?
Although the two go hand-in-hand, value and business growth are two different things.
When a buyer looks at business growth, they look at all areas. This growth could mean physically (larger premises) or more online presence, but while growth is positive, it doesn’t necessarily mean increased profitability.
Value, on the other hand, is all about profitability. Increasing the value of your business will affect the terms of sale when the time comes, specifically how much you can expect to profit from your business.
When looking to buy a business, any serious client will look at both of these areas. They’ll want to know the true value of the business they’re buying and the opportunity to develop it in the future.
How to increase the valuation of your business
There are a few different ways you can increase the value of your business, most of which look at making it as attractive to potential buyers as possible, be it financially or reputationally.
Understanding your company’s value
Before you look to increase the value of your business, you need to understand how much it’s worth in the first place.
A good way to do this is to have an independent business valuation that will look at your operation’s financial health and structure. From the valuation, you’ll receive figures on the market value, book value and asset value of your business from an appraiser.
Once you have this information, you’ll be able to look at the areas that may need improvement. If there are any significant issues you’re facing, you’ll be able to resolve them before putting the business on the market.
Improving cashflow and boost profits
A positive cashflow will benefit your business in the short term and create a healthier business for your potential buyers.
If you have a negative cashflow, buyers and investors could be discouraged as it may show signs that the business may struggle to make a profit once it has been taken over.
The main ways you can improve your cashflow include:
- conducting thorough inventory checks
- making sure clients pay their invoices on time
- cutting down on non-essential spending
The best way to maintain a positive cashflow is by eliminating any risk before the problems arise.
Another good way of improving your cashflow while making your business as attractive as possible is by clearing any outstanding debts you may have. Being financially solvent as a business is important, especially for buyers.
Have a strategic plan in place
Compiling a business strategy will be a good way to present your business’s credibility to buyers. Having goals and milestones in place will show sustainable and reasonable growth, so buying the business has long-term benefits.
In business, reputation is everything. Keeping your customers happy is one of the best ways to build a strong reputation and business presence. This will be very important for any prospective buyers.
Providing the highest quality customer service will usually result in repeat business, which will be an important part of keeping a positive cashflow.
If you expand your customer base before putting your business on the market, you’re guaranteeing your successor business for when they take over.
Invest, improve and refine
A well-trained and established team will be seen as a money saver for your potential buyer as it will eliminate the need to spend anything on sourcing and training new employees once the handover is complete.
By putting your staff through training courses, investing in bonus plans or offering them other benefits, they’ll likely remain in place once you’ve parted ways.
The same goes for your premises. If there’s equipment or assets that need repairs or upgrades, now is the time to do it. The last thing a buyer will want is to have to replace everything once they’ve already spent so much on the business as a whole.
Smith Butler has years of experience when it comes to business valuation and strategy. To make sure you get the best deal for selling your business, get in touch today.