How Do I Maximize My Business’s Value?
To maximize the value of a business we must consider two concepts, what makes a business attractive to a buyer and an understanding of what a buyer wants to see when they purchase a business.
Several factors that can positively or negatively affect value are:
- Ensuring the business is not reliant on the owner and that there is a succession of employees that could take over the existing owner’s job when he/she departs.
- Records of a steady increase in profit for the last two to three years, with a similar increase in sales over the same period.
- Positioning the business as a good low risk return on the investment.
- Highlighting an established customer base, sound internal systems, market awareness and credibility, an operational framework, and strong cash flow.
- Positive industry trends.
- Company awards, testimonials or even an ecologically responsible product or service.
The second is an understanding of what a buyer wants to see when they purchase a business. The true value of your business is effectively what any potential buyer would be willing to pay at any point in time.
Most investments involving the acquisition of businesses are obviously motivated by the desire of the investor to make money. The drivers that influence a valuation decision are the amount of money that can be made from the investment and the level of risk in achieving those returns. There are several intangible reasons value can increase or decrease, the quality of your systems and processes, the professionalism of your Company and negotiating a better deal based on future profits rather than historical performance.
Your business valuation will be less if:
- The Company success is dependent on the Owner.
- Your sales and profit history are in a downward trend.
- Your products and services need considerable investment to continue on-going production.
- There are competitive or industry trends that will make your business less profitable in the future.
Now is the time to implement a value acceleration plan for your business. If you are ready to take charge of your future, contact Weiss Advisors today for a no-obligation discovery consultation.