One thing is determining the value of your business, it is another to maximize that value. When you want to sell your business at the highest fair price, it has to meet certain requirements. Preparing your business long before it is listed can absolutely make a difference when it comes to maximizing the value. When in doubt, work with a business advisor to adopt these business goals to maximize the value of your business.
1. Credible and organized financials that prove profitability
First and foremost, a business is only as valuable as its profitability. By organizing your financial statements and tax returns, you have easy-to-reach proof that your business is worth what you say it is. A potential buyer is much more likely to pay a fair and higher price if they feel confident their investment is in an organized business.
2. Recurring revenue
These organized financials will have to show the fact that your revenue is consistent and recurring. This bodes confidence that the business will continue to be profitable even after there the transition of ownership.
3. Eliminate customer concentration
Put simply, customer concentration is defined as a measure of how total revenue is distributed among your customer base. In essence, a business that serves a larger number of small-volume customers is much more stable than one that serves a small number of large-volume customers. This is because profitability is not heavily linked to a customer who could change the fate of your business if they take their loyalty elsewhere.
4. Aggressive marketing
Diversifying your customer base can come through aggressive marketing. The more people that know about your business, the more it can grow. By increasing your numbers, you are ultimately eliminating an imbalance in customer concentration. Consider investing in social media managers to develop plans to spread the word about your business.
5. Independent ownership
Independent ownership is literally what it sounds like - it is a business that is privately owned. This means that there are no outside controls affecting day-to-day operations or potential business sales. A potential buyer will find your business to be worth a greater investment if they find they will become the sole owners.
6. Competitive price
A competitive price is one that is not too high or too low. You may think that being the most affordable business for sale might make you sell faster, but that is incorrect. If a business is priced lower than it is worth, potential buyers will be concerned that you are trying to get yourself out of a sticky situation quickly. The key is to price your business based on what it is really worth but be aware to not make it so high potential buyers do not even take a second look. Your business broker can not only help you value your business but also determine the right competitive listing price.
Last, but certainly not least, is your business’s ability to be scaled. In other words, can your business grow or decrease in size? A potential buyer will want to know how easily your business can be taken to the next level or perhaps taken down a notch. The flexibility to do what they might like once they assume ownership is an attractive asset, and one that can maximize the value of your business.
For all concerns, questions or ideas regarding the possible sale of your business, contact your local business brokerage experts at Transworld Business Advisors Houston. A business broker can break down what factors will maximize the value of your business and help you take the next steps. Contact us today!