Somewhere down the line you may decide to sell your business. If you want to get the best price, then you better start planning now. Here’s 3 important steps you can take to increase the value of your business and sell it for top dollar:
1. Find out how much your business is currently worth. First, look at industry or association sources and find the most common valuation method for your type of business. Or, hire a valuation firm, investment banker or CPA. You can also get started by using BizBuySell’s valuation tool. It’s also important to have an understanding of how companies in your industry are valued by the market.
2. Audit your business, as would any buyer. Put yourself in the buyer’s shoes and take a good hard look at it. Which elements make it most valuable? What makes it a risky investment? How does it measure against its competitors?
3. Mitigate your company’s risks and enhance its value. From a buyer’s perspective, there are 6 major risks to consider: 1) Management: Are they talented? Will it make a difference if they leave?; 2) Reliance on the owner: Will the business be able to operate without you (the owner)?; 3) Financial Records: Are they true and accurate? Have they ever been audited?; 4) Customer base: Are the customer relationships with the company or with the owner?; 5) Competition: How does your company compare with its competitors?; and 6) What trends or disruptors could kill your industry?
Take all the necessary steps over the next two to three years to mitigate all of your company’s risks. At the same time, do whatever possible to enhance your company’s value. Now is the time to start taking action to grow sales, improve your margins, protect your intellectual property and grow your management team. So, what are you waiting for? Get started!