The day may soon arrive when you’re ready to sell your business. You may even have a price in mind, based on similar businesses that have sold recently in your area. Yet, many business owners, after taking a close examination of their business in its current condition, become disappointed when they find out its true market value. That’s why it’s so important to plan ahead now and prepare your business before placing it up for sale in the future. So how do you increase the value of your business?
Here are 7 important steps you can take now to boost the value of your business and sell it for a maximum return:
1. Increase profitability.
The first step to take, so potential investors will understand the value of your business, is to get proof of continued increasing profits. If you can show them your profits will continue to trend upward, you can fetch a higher price. Finding opportunities to increase sales, reduce costs, and create efficiencies leading up to a sale will demonstrate an extra profit boost and impress buyers.
2. Create streams of recurring revenue.
Find ways you can increase sales and revenue, especially recurring revenue, that will generate income for the new owner - right from the ‘get go’. This may include shoring up any pending customer or vendor contracts, giving the new business owner peace of mind that they will have consistent revenue flow as they get accustomed to running their new business.
3. Establish and document processes.
When you Institute and document regimented processes, which enable the company to function effectively without your involvement, you will make buyers feel at ease. This can certainly increase the value of your business. Potential investors need to be convinced that long after you’ve made your exit, the business will continue to thrive and run smoothly.
4. Cultivate a high-quality workforce.
Another way to increase the value of your business is by hiring top-notch employees. New owners don’t want to deal with employee turnover, especially when they’re new to the business. Experienced workers bring balance and stability and help to generate profit. You can increase your company’s worth by actively cultivating a high-quality workforce.
5. Position your products or services to stand out in the market.
Businesses with differentiated products and services are uniquely positioned to dominate a part of the market. They have an advantage over their competitors and therefore, can command a higher price. You can do this by developing and promoting any intellectual property, patents or other unique feature of your products or services.
6. Identify and highlight tangible and intangible assets.
It is essential to list and price all physical assets of your business, including furnishings, fixtures, equipment and inventory. But also consider the value of your intangible assets—things like contracts and agreements, customer relationships, brand recognition, and more. Every non-material asset that contributes to your company’s profit line has the potential to boost its price.
7. Mitigate your risks.
Put yourself in the buyer’s shoes. Do whatever is possible to enhance your company’s value. Are your financial records accurate and up to date? Is your facility looking its best? Are there any loose ends that you need to tie up before you list your business? Increase the value of your business by giving buyers what they prefer a business that comes with low risks and high rewards.
The best part about learning how to increase the value of your business is not only that you are prepared to sell it. As an added bonus, your sales and profits will increase right now. When you put time into shoring up the different elements that make your business stand out, it only becomes more stable, which will help your business command a higher price.
Next Step: Get your Business Valuation Report
Compare your business to others in your market to set the right asking price.