Getting the Maximum Sale Price for Your Business
Home sellers and business sellers have this in common: they both want to get the maximum price for their equity and their years of hard work.
If it’s your home you’re selling, a realtor will be happy to give you a list of fixes known to increase value; everything from simple, on-the-surface emotional appeals (a few well-placed shrubs, a new coat of paint) to deeper, more structural improvements that will enhance value for even the least emotional, most analytical buyer.
But what if it’s your business you’re selling? Is there a business equivalent of “curb appeal?” Are there spruce-up steps that will appeal to both the emotional and rational sides of potential buyers?
Yes, and properly executed, these fixes will help you get maximum value for your business. Some of them will take time—as much as a few years—to implement, so foresight and planning are essential.
Turning Point has years of experience appraising closely held businesses. Based on that experience, here is our Top 10 list of improvements that will enhance your company’s value:
- Enhance the Brand. Do whatever you can to make your service or product not just desirable, but unique in the marketplace. Emphasize service, quality, price, or whatever makes your product or service distinctive.
- Maintain Barriers to Entry. Invest in your product or service so that the competition cannot imitate or duplicate your offerings.
- Protect Processes and Technologies. Make sure your “secret sauce” stays secret. Confidentiality agreements, patents, and non-compete covenants should be in place.
- Build Goodwill. Keep your customers happy. Maintain market share through top-notch service and fair pricing. Strive to build and maintain market share.
- Broaden Your Customer Base. Endeavor to diversify clientele. Expand in geography, industry or size.
- Reward Management and Employees. Keep the team happy. Loyalty to the company, especially in the face of an ownership change, is worth a lot to a potential buyer.
- Maintain Supplier Relationships. Pay your bills on time. Keep costs under control, and sustain positive working relationships with suppliers. This gives your business a “move-in ready” look to potential buyers.
- Throw Out the Bad Eggs. Identify product or service lines that are dragging down the overall value of the company. Eliminate them or sell them off. Potential buyers will see a lean, profitable company.
- Protect Long-Term Relationships. Nurture your ongoing customer relationships. Nothing looks better to a potential buyer than a long, steady, secure revenue stream.
- Keep Files Organized. Buyers will undertake a due diligence review of the company and may ask to see financial statements, tax returns, contracts, and other files. Keep these documents organized, consistent, and complete. Present your company in the best possible light, and above all, make it easy for the buyer to buy.
All of the above improvements will drive value and optimize the sale price of your business. Business owners should review this list and begin implementation a few years in advance of a contemplated sale.
What if you’re not sure about that contemplated sale? What if you think you might want to sell in a few years but aren’t absolutely certain?
Smart homeowners make improvements knowing that even if they don’t sell, they’ve increased the pride and enjoyment they’ll take from their home. Likewise, all of the above improvements are solid, fundamental practices that will enhance profitability even if you decide not to sell.
Getting the most for your business takes thoughtful planning and the kind of expertise that Turning Point can provide. Call us to discuss your situation today.