Thinking of selling your business? Or just want to increase the value? There is much more to it than pure net profit and turnover or even what the EBITDAR is (Earnings Before Interest, Taxes, Depreciation, and Amortization). Below are some of the key elements to work on to increase the value. Please get in touch if you would like detail more specific to your business.
Financials
It’s not just how good your P+L and Balance Sheet looks but also how good the reporting is. Do you receive these important reports in a timely, regular way? Remember to remove all owners expenses not directly applicable to the business.
Assets
The value of debtors, stock, equipment, machinery, IP (intellectual property), goodwill, brick and mortar. Sometimes it is difficult to increase the value of these without effecting other parts of the balance sheet. eg. buying more stock will probably increase the creditors in the business. However formalising any IP, Patents will increase the value.
Ensure your debtors are up to date, credit checked and working within their credit limits. Like wise with stock – have you got redundant stock in there?
Location
Is the business location dependant? Could it be relocated and merged into an other business? An acquiring company would be looking to ditch overheads and one o fit quickest ways is to move the business into their own premises.
Growth Potential
Are there new markets you can move into? Buyers are sceptical of high business valuations based on the potential future turnover without some evidence you can demonstrate that it is achievable. Perhaps due to cash constraints you’ve been unable to move into these markets that the buyer with more cash maybe be able to achieve
Dependance
What % of turn over is dependant on one customer, employee or supplier. This can be fixed by finding new customers, tying in the employee (I have seen business owners give shares in the business to key employees to train their loyalty) and suppliers – can you find alternatives?
Cash Flow
Does the business swing between high cash – no cash? If you are asking a buyer for a large chunk of cash to buy your business they may not be left with enough working capital. Could you change the payment terms with your customers and suppliers to smooth out the ups and downs?
Recurring revenue
This is a big driver to business value. Is there a % of revenue that comes in every month without more sales effort eg. maintenance/ service contracts. Is it something your business could offer to the customers?
USP
How strong is your Unique Selling Point compared to your competitors? What % of the total market does your business have? Can you improve your point of difference?
Customer Satisfaction
Do you have regular happy Customers that would recommend you? Can you demonstrate this? eg. with reviews? If not start asking customers now for reviews.
You!
How dependant is the business on you being in the middle of it? Will customers, suppliers and staff only talk to you? What happens if you go on holiday? By systemising the business and trusting in the system and the people who work for you dependance can be reduced.