So, you’ve made the decision to cash in on all of your hard work and sell your business – but how can you ensure that you get a fair price for it?
More often than not, the first thing we’re asked by most business owners looking to sell their business is “how much is it worth”?
Many factors will influence the value of your business including the industry you operate in, financial information, customers, staff, and competition.
Whether your motivation is purely financial, or you are looking to move on to a new venture, check out our top tips to maximise the value of your business before selling.
Maximising Value in the Short Term
If you are looking for a quick sale, you may not be able to significantly alter the fundamentals, but there are smaller changes that can be made to increase the value of the business.
Get Your Accounting In Order
Sloppy accounts are an instant put off for serious buyers. If they don’t know what’s hiding behind the numbers, it’s harder to forecast and plan.
Enlisting the help of an accountant or bookkeeper to ensure that all your accounts are in order will increase the value of your business by making it more attractive to potential buyers.
Tighten Up Your Contracts
Customer contracts, particularly those using retained services are extremely important to prospective buyers. If all your customers are on a contract that can be cancelled at any time, there is a greater risk to the buyer.
Ensuring that your contracts are designed with business profitability in mind and are enforceable is an easy way to add value to your business – keep in mind that you will need to inform existing clients if there is any change to the terms of their current contract.
Review Your Spending
Every business should engage in budgeting which includes an element of reviewing spend for the previous year and budgeting for the upcoming year.
Reducing spend on unnecessary business expenses improves the profitability of the business thus making it more attractive to buyers.
Of course, you do not want to make cuts that reduce the quality of the service offered by your business and make you less attractive to future customers.
Whilst a review is something that can be done in the short term, the implementation of cost saving activities can take longer.
Ensure Your Website Looks the Part
With more and more business now carried out online, any serious organisation should have a website that provides useful information for potential customers and acts as a marketing tool for the business.
If your website and other marketing material are outdated or non-existent – it could have an impact on the amount a prospective buyer is willing to pay.
Maximising Value Over the Mid to Long Term
If you have a longer timescale for selling your business, there are changes you can make to influence the overall value of your business.
Assess Clients & Staff
Key elements that will be of interest to prospective buyers is the clients and staff that your business relies on. If you are heavily reliant on one large client or contract, there is a much bigger risk for the new owner.
Likewise, if your business is wholly dependent on you as the business owner to run smoothly, buyers will count this as a risk that will negatively impact the price.
Whilst winning new clients is easier said than done, diversifying your revenue streams across several clients can increase the value of your business.
Furthermore, having committed staff and a strong management team in place can also increase value, particularly for investor business owners looking for opportunities with low management requirements.
Dominate Your Niche
It goes without saying, but being the leader in your niche is leverage that can be utilised to justify several additional 0s at the end of your business valuation.
Becoming a market leader generally requires investment – whether that’s through product development, developing new services, hiring the top talent in your industry, competitor acquisitions or increasing marketing spend.
As well as additional spend, dominating your niche takes time. How much time depends largely on how strong the competition in the industry is – so this method may not be suitable in all scenarios.
Use a Business Broker
Engaging the services of a professional business broker can help save you time and money at every stage of the deal.
As well as understanding the real value of your business to help you get the best price, a business broker can engage a large network of prospective buyers to increase the chances of your business being sold.
Business brokers are well connected and can help you engage with professionals such as accountants and legal experts to prepare your business for sale and ensure the process goes smoothly.
Furthermore, a business broker handles all the negotiations on your behalf, meaning that you won’t be subject to pushy tactics from the buyer or their representative.
Get a Free Valuation with Bristol Business Brokers
Are you looking to sell your business? At Bristol Business Brokers, we’ve already helped hundreds of professionals in Bristol and beyond get a great price for their business.
To find out more about our process of selling businesses and to get a free valuation from one of our expert brokers – give us a call today on 0117 379 0117 or fill out a contact form and we will get back to you.