Any business owner or shareholder who is considering selling their business will often wonder what can be done to maximise the sale price of their business. In truth, there are many steps that a business owner can take in order to increase the value of their business prior to selling their business. In this article, we look at three easy steps that any business owner can take in their business to increase the value of their business prior to the sale of their business.
Decreasing the costs incurred by your business, all other things being equal, will increase the profitability of your business. Businesses with higher profits are more valuable than those with lower profits, thus meaning if you can decrease your costs your sale price will be increased should you sell your business.
There are a number of ways to decrease the costs of your business, including reducing unnecessary salary expenses, speaking to your suppliers to re-negotiate their terms and lower their prices, and making smaller savings on items like entertainment expenses. We encourage clients to commence work decreasing costs well in advance of taking their business out to the market for sale.
Finding new, profitable customers will enable your business to generate new revenue sources and increase its profits. The increase in profits from finding new customers will assist to increase the value of your business before sale, and thus the sale price of your business. Further, by finding new customers, you will be able to potentially diversify your customer base, thus decreasing the risk profile of your business and increasing its value and sale price.
So, how do you find new customers? Sometimes it is useful to look at options to focus on marketing initiatives that you already know work well for your business. Other times, it may be useful to look for opportunities to try new marketing initiatives that may assist you with finding new customers and increasing your revenue base. The bottom line is, the more profitable new customers you can find, the greater your business’ sale price will be.
Often the owner(s) of a business will be quite integral to the ongoing operation and performance of that business. This can be problematic when it comes time to sell the business, noting that as part of a sale the owners will often leave the business, meaning a lot of that knowledge can be lost. Businesses with a high reliance on their owners are riskier than those with minimal reliance on their owner, meaning those businesses with less reliance on their owners are normally valued at a premium and achieve a higher business sales price.
Decreasing the reliance on owners of a business is tricky but can be done. It is important to start this process by looking at what simple tasks you do as an owner that you can delegate. The more you delegate, the less work you will be responsible for. Next, it’s important to consider whether you can implement a staff manual that contains processes and systems for how common business tasks can be done. If you’ve already taken these steps and you’re still heavily involved in the operation of the business, then it may be worthwhile looking at whether you should hire a general manager to enable you to completely remove yourself from the operation of the business.
Groves & Partners are experts in negotiating the sale of companies and businesses for our clients. As brokers and advisors on the sale of businesses and companies, we solely act for higher value companies.
We have significant experience in working with clients to assist them with increasing the value and sale price of their business prior to sale.
To find out more about how we can partner with you to achieve success in the sale of your business, or to book a free, confidential, no obligation consultation contact us on 1300 892 717 (+61 2 7208 7970) or email info@groves.com.au.