Adding Value To Your Business Now for the Future

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If you are looking to sell a business, it is critical to look at the value of the business. But a typical business really has two values. The “academic” value is the one determined by a professional business valuation. The other is the “true market” value. The academic value is arrived at with a formula based on the firms’ hard assets, cash flow, industry averages and multiples. The fair market value also takes those items into consideration, but then considers what buyers are really willing to pay.

For many small and mid-sized businesses hard assets like equipment, vehicles, land, buildings, and inventory may be limited. For some small businesses there may be no hard assets at all. Instead, their value is based on intangibles like employees, business processes, customer lists, location and business relationships.

To maximize the fair market value of your business now and in the future when you are ready to sell, it is vital that you capitalize on those intangible assets.

Develop key employees. Buyers generally are not interested in paying a premium if the business relies on you for its success. Remember to delegate responsibility to key employees and involve your key staff members in the daily decision making process. Demonstrating that your company’s success is reliant on your capable, well-trained employees – not just you – will pay off at the time of sale. In most instances, keeping the potential sale confidential is advised as employees may become concerned during the process.

Document what you do. Be sure that job descriptions, operation processes, and strategic plans are documented. Documented records and plans give a buyer greater comfort that he or she will be able to emulate your successful growth. Also, be sure to keep business records like sales and expense reports, internal profit and loss statements/balance sheet, and tax returns clean and well-organized. This is a critical component for achieving the best outcome and higher selling price.

Build relationships. Name recognition, customer awareness and your reputation are all part of your business value. Even if your company does not have many hard assets, your relationships are key. Consider diversifying both supplier and customer accounts. Too many eggs in one basket are not a good operating or selling point.

Improve cash flows. A potential buyer wants to see the “true cash flow.” And, of course, in the business world cash is king. Be sure you are driving all income to the bottom line. Every dollar not shown equates to money left on the table in the sale. A seller and professional business broker cannot and should not represent unreported income.

Review your assets. Sell off or dispose of unproductive assets or unsalable inventory.

Find and build your niche. You do not have to be everything to everyone. Buyers will pay a premium for a niche that has barriers to competitive entry.

Remodel, clean, and organize. What is the first thing anyone does when they put their home on the market? They spruce things up and make sure everything is in its right place. Yet, in business, that is rarely considered. A well-maintained facility will get the best price. Even businesses that lease space can benefit from a thorough cleaning and organization to convey a feeling of quality and efficiency.

Keep these important intangible assets in mind if you’re looking to sell your business. They convey a value that financial statements alone do not. If you are looking to sell, make a plan. Start working on the intangibles well in advance of putting your business on the market. For many business owners, they reach a point where they burn out and psychologically retire early, before a sale is made. It is extremely important to keep working and your focus on the business right until the sale is complete.

Finally, when the time to put your business on the market arrives, consider lining up key specialists who will help you make the most of the sale – an attorney, your accountant, and a trained Certified Business Intermediary to name a few. Remember, you only have one chance to sell your business, so you want to do it right.

American Business Brokerage and Stacy L. Alario, FCBI have been assisting business owners in the sale of their business for over thirty years. For a confidential meeting to discuss your exit strategy, please call or email Ms. Alario, Certified Business Intermediary at (941)957-1414 STACYALARIO@AOL.COM

American Business Brokerage

…we sell businesses confidentially.

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