ENTREPRENEURSHIP / SEP. 15, 2014
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How To Sell Your Business for More Than It's Worth

When selling your business, setting a value is just one of many steps and tasks to complete. For most people, they simply look to industry trends or accepted strategies to determine what it’s worth. They look at dollars, cents, stats, and figures. They add up the actual value of assets (property, facilities, equipment, stock) and income. And that works...to a degree. It will give you a basic, ballpark figure.

But let’s be honest. You don’t want a basic ballpark figure based on tangible and verifiable figures. What about the blood, sweat, and tears you put into building the business from the ground up? Shouldn’t that count for something? Yes it should. But in most cases, it doesn’t. Your buyer doesn’t care about that.  

The good news? There are ways you can increase the perceived value of a business, and that helps you set and get a selling price higher than what the simple math says your business is worth. This is in no way underhanded or manipulative. You don’t lie, or fudge the numbers, or cook the books. You simply highlight and emphasize some of the intangible assets that your company does possess.

Timing

Ever notice that a sports team will often trade their best player? It comes as a shock to the fan base, of course, but it’s a crafty business move. Trade when their value is high. Likewise, with your business, you need to sell at the right time. Did you just land a major contract or account? Is your company receiving positive media coverage for some initiative or product? If so, you might want to consider pulling the trigger and getting out...sell when your (perceived) value is at its highest. It may seem counterintuitive, but it works. That big account or positive coverage adds to its value. Sell at the right time, not when things are looking bleak.

Your Financial Records

In order to increase your perceived value, you need to ensure that all your financial records - bookkeeping, taxes, loans, debts - are up-to-date and impeccable. If you can swing it, eliminate all debt, or at least negotiate the repayment terms to be more favourable. All your records should be well organized, complete, and in a standard format that anyone coming in can easily decipher and use.

Use a Broker

A business broker works on your behalf. You’ll lose a bit of the sale to commission, but if they’ve done their job (and their cut depends on it), they will help to increase the value, ultimately netting you more than you might receive on your own. They know where to look for serious buyers, they know how to present your business in the best possible light, and they know the key areas to shine a spotlight on. It will cost you, but you’ll likely get back more than you “lost”.

Build Up Social Media Presence

Businesses today need to not only have a social media presence - Facebook, Twitter, Google+, Instagram, Pinterest - but they also need to be active. You need to engage your followers and fans. You need to reach out to them, cultivate brand loyalty and satisfaction. Do that, and your numbers will go up, and those customers will spread the word far and wide. Share useful content and links that they can then retweet and like. These numbers (your number of fans, likes, followers, +1s, repins, and so on) won’t automatically mean higher sales and greater revenue, but it does represent your business as a thriving and popular company. And that has tremendous intangible valuable.

Multiply Your Revenue Streams

If possible, have more than just one revenue stream. Diversify. Multiple (but not too much) products or services. A single revenue stream can quickly dry up and disappear, even if it’s generating lots of money at the moment. A savvy buyer knows this. Multiple revenue streams are a big neon sign announcing your company as strong, robust, and protected from that happening.

Reduce Reliance on Just One or Two Employees

Is your company dependent on just one or two people, yourself included? That’s a warning sign for a potential buyer. Does one salesperson account for 87% of your sales? That’s a red flag. Too much reliance on one or two individuals is problematic: what happens if that person quits or retires? Does the business “die” with their departure? Work towards a well-balanced business that doesn’t lean on any one person. If you can demonstrate that, your perceived value is much, much higher.

Create a Plan for Growth

As the current owner, and someone that built it up from nothing, no one understands your business and market better. Have a concrete plan for growth that you can provide your buyer. Show them where they can grow, and expand, and explore over the next 3-5 years. Demonstrate in explicit terms, stats, and figures the how and where of business growth once they take over. Your business is earning “this” much now, but it could be earning “this” much this time next year. Value. Up.

A business is about more than the bottom line. It’s important, of course, but its ultimate value is the sum of so much more. Know what a buyer is looking for, demonstrate reliable revenue, new streams, and potential for growth, and it’s perceived value goes up. Build a business that is not reliant on anyone one person, and its value goes up. You’re not looking to trick or deceive...if anything, you’re throwing a bright, high-intensity spotlight on all areas of the business so the buyer can see everything.

 

Image: istock

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