We have compiled a list of tips that will be advantageous in helping you generate added value for your business. Implementing these tactics will better prepare your business for success and a potentially greater value:
DIVERSIFY YOUR CUSTOMER AND SUPPLIER BASE
It is important to understand the makeup of your customers to see if you have exposure related to concentration. If there is revenue concentration in your customer base (one customer generating 10% or more of revenue), there is a greater risk to recurring revenue. Typically more recurring revenue from a well-dispersed customer base is more valuable to a prospective buyer. If you have a large customer that will be hard to replace, buyers will typically reduce the amount they are willing to pay.
If you are reliant on a specific supplier or suppliers that can’t be easily replaced then there tends to be a discount associated with dependency.
MANAGEMENT ABILITY AND DEPTH
As mentioned, if the owner is the primary revenue generator and client contact there is a significant risk to a prospective buyer. If you are able to develop and train several employees so the business is less reliant on you or certain key employees than you can create more value in the Business.
KNOW YOUR COMPETITORS
Even though this is an uncontrollable factor it is important to understand your competition. Maximize what you do best and minimize the risk that is within your control. If you keep your customers happy they will be less likely to care about the competition. That being said, they might be the best information on competition since they are being solicited for their Business. Try to keep an open dialogue with your customers to make sure you are aware of the changes going on in your
STREAMLINE YOUR OPERATIONS
With today’s advances in technology and automation, a company’s systems and process chain require evolution. Owners that embrace change and adapt to more efficient and productive ways to operate their Business. will not only increase profits but allow for their business to grow and expand. This also adds to the perception of a well-run and organized business. On the other hand, buyers tend to pay less for businesses that need significant capital expenditures related to technology.
REDUCE NON-ESSENTIAL BUSINESS EXPENSES
Keeping Business and Personal expenses separate is the best policy. Small business owners tend to have non-essential expenses included in their financial statements. When preparing a business to sell, these expenses will need to be explained in order to add them back into the cash flow. Keeping these types of expenses separate is beneficial because you avoid buyer scrutiny and the perception of a less profitable Business.
CONSIDER CA PREPARED FINANCIALS
It would be wise to consider a Chartered Accountant to prepare your annual financial statements. Studies have indicated that companies with audited or reviewed financials, or at least professionally managed books for small businesses, tend to result in a higher purchase price than those not well maintained. If your Business has revenues of 5O Lacks or more, we recommend having CA prepared compiled financials at a minimum.
CONSIDER ENGAGING A BUSINESS TRANSITION (EXIT) PLANNING ADVISOR
Regardless of the age of the business owner or the owner’s business transition goal, through a sale to family, employees or an outside 3rd party, planning for the long-term will a significant benefit for the owner.
CONSULT WITH A VALUATION ADVISOR
To get the best value for the sale of your Business, you should consider hiring a valuation advisor. They will assist you through the entire process and will help make the transaction as simple for you as possible. In summary, we covered key terminology and value influencers to get a better understanding of the valuation process. It is important to understand valuation methodology so you can implement a strategy that will generate the most value for your business. If you have any questions regarding valuation or a sale process, don’t hesitate to reach out to Venture Care.
Business Valuation By Venture Care
Venture-Care organizational structure, vast experience in Business Valuation, and research tools allow it to provide excellent, supportable valuation services regardless of the type of valuation report requested and the size of the subject company. Depending on the needs of our clients and the purpose of the valuation, we can offer different types of valuation reports, ranging from an opinion letter to a full, comprehensive valuation report. We pride ourselves in knowing that we can provide a flexible fee structure for our valuation services and turnaround delivery time for our clients.
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