Increase the value of your business before selling

08 September 2015

Guest post by Peter Watson, CEO, Biz Listings

When it comes to selling your business, it helps to understand the difference between selling price and value. The selling price is a number that you set based on what you perceive to be a fair amount to charge for your business. The value of your business is what people are willing to actually pay for it.

When you increase the value of your business, you automatically increase the selling price. Most business owners do not realise that raising the price does not necessarily raise the value, and that is why they do not get the deal they want.

There are a few things you can do to increase the value of your business and raise the selling price to people who are truly interested in investing in what you have created.

Run your business as though you are going to sell it

When you first open your business, you have no intention of advertising the business for sale any time soon. However, you can constantly raise the value of your business if you act as though you are trying to attract potential buyers. Most buyers can look at a company's financial ledger and see the increase in business that comes when a seller is preparing to sell their company.

But if a business owner is constantly working hard to maximise revenue and always feels as though the company books will be reviewed by a potential investor, then a persistent increase in business can look very impressive to a buyer.

Work on corporate policies

When a buyer looks at your company, some of the areas they will look at first include:

  • Vendor relationship policies;
  • Employee recruiting and training policies;
  • Business plan development policies.

The worst time to start adopting effective business policies is in the months leading up to the sale of the business. It is always best to adopt these important policies from day one and continue to develop those policies as the company and marketplace change.

Most buyers want to walk into a situation where a business is as profitable as possible, and having strong business policies is an important part of that process.

Never settle for mediocre employees

The staff your organisation has in place is a critical negotiating point when it comes to the value of your business. When you are trying to secure financing for your business, investors will want to know as much as possible about your management team. When it comes time to sell your business, any future buyer is going to be very interested in the quality and productivity of the staff you have in place.

A buyer does not want to buy your business and then have to spend money and time replacing sub-standard employees. The more efficient your staff are, the more value your business will have to a potential buyer.

Get the right price for your business

If you want to get the maximum price for your business, you have to be obsessed about increasing your company's value. In order to get the sale price you want, you need to focus on important factors such as profitability, efficient operations and future growth.

Any buyer will challenge the sale price you set for your business, because buyers only want to pay what they perceive to be the value of your business. If you focus on sustaining value in every aspect of what your company does, then you will be able to cash in when it comes time to sell.

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Last updated: 02 November 2015