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How to Increase the Value of Your Business Before a Sale

How to Increase the Value of Your Business

Countless entrepreneurs have worked tirelessly for years in order to turn their commercial dreams into a reality. Now that you’ve finally climbed to the top of the marketplace and enjoy your status as a profitable business, however, you may be itching to move on to new and greener pastures. For many entrepreneurs, selling their successful business is a surefire way to retire rich or foray into a new industry with financial security behind them all the while.

Nevertheless, selling your business is easier said than done, and bolstering the value of your business before a sale isn’t easy if you’ve never done it before. Here’s how to increase the value of your business before a sale, and the crucial mistakes you’ll want to avoid.

Start by diversifying your revenue stream

In many ways, you need to view your business’s revenue stream as you would your own personal investment portfolio; if it’s not diversified, it’s inherently at risk, and thus less valuable overall. If you fail to diversify your business’s revenue stream before trying to sell it to someone else, you could very well end up with significantly less cash than you would otherwise enjoy. The more ways that you can generate money, the easier a time you’ll have when persuading another entrepreneur to take your commercial empire off your hands.

Minimize customer concentration at all turns and don’t be afraid to foray into new areas if you think you stand to gain a profit by cornering a new market. In time, this will help you bolster your overall margins while attracting a greater array of potential buyers all the while. After all, some investors are only interested in purchasing businesses which have diversified income streams, so concentrating your wealth in a narrow area could render your business unappetizing to a prospective buyer who could make you rich beyond your wildest dreams.

Once you’ve diversified your revenue stream, consider creating some flashy graphics and engaging datasets which elucidate how much more secure your business is now that its eggs aren’t all in one basket. Services like Infographics by AskTraders could help you conjure up visually-engaging ways of demonstrating your company’s outstanding value to prospective buyers. Remember that nobody will want to buy our business unless you can prove to them that it’s a worthy investment, and that visually-engaging media is a guaranteed way to woo over otherwise stone-cold investors.

Recognize the value of your workers

The next step towards increasing the value of your business before you sell it is to recognize the value of your workers, who were doubtlessly a major part of why you attained such great success in the first place. Nobody puts more work into a company’s well-being than the entrepreneur who founded it, but that doesn’t mean your efforts are the only one worth praising. Recognizing the value of your workers and striving to keep key employees on board once the sale has been made will go a long way towards proving to potential buyers that your business will remain profitable and at the top of the market for years to come despite the absence of its original founder.

It’s a proven fact that promoting employee wellness benefits everyone, so don’t be afraid to offer enticing benefits packages and competitive salaries to your key workers in order to keep them on board despite the forthcoming changes you’re ushering in. The women and men who have mixed their sweat in with yours as they worked tirelessly to bolster your company upwards deserve a reward, but more than that, enticing them to stick around will prove to future business owners that your company has unparalleled human capital that will come along with the business acquisition.

Don’t make the mistake of focusing on your executive team, as the rank-and-file workers who are a valuable part of your company will also doubtlessly be surveyed by prospective buyers before they finalize their purchase. If your everyday workers have bad things to say about the way the old boss treated them, these new owners may end up offering you a lackluster price, and who could blame them?

Know what not to say

One of the most important factors of increasing your business’s value before a sale is knowing what not to say, as seasoned business investors will be aware of the common refrains which prove to be less-than-true later on down the line. Know the common tall tales that entrepreneurs tell to themselves and their prospective buyers before offering up your own company to the market, and you’ll be much less likely to repeat these fictitious lies yourself. If you’re dealing with a seasoned business buyer who’s been around the block a few times before dealing with you, repeating these tall tales could be what ultimately turns them away from your business.

Finally, understand that accurate valuation is perhaps the most important part of selling your business successfully. If you fail to arrive at an accurate valuation, your buyers will turn away from you in droves, and your future business performance may be negatively impacted. Take your time when estimating the value of your business and don’t hesitate to enlist a professional analyst if that’s what’s needed to produce sound results.

Increasing the value of your business before you sell takes hard work, but it will inevitably pay off in the form of a larger acquisition price. Keep your employees’ wellbeing in mind and never cut corners when establishing your company’s value, and you’ll find a happy buyer before you know it.

Published: June 21, 2019

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Matthew Davies

Matthew Davies is a creative and passionate HR Director with 15 plus years proven experience up to board level in international and world-class corporations. He has had the privilege of working on a wide range of projects that have enabled him to apply his leadership and technical skills and he have proven expertise in managing change, business integration and outsourcing.

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