How to Raise the Valuation of Your Business Before Selling

11 Nov How to Raise the Valuation of Your Business Before Selling

How much is your business really worth to potential buyers? Selling a business requires the business owner to determine the business valuation before they can list the business for sale. This is the amount the business will be worth to the new owner and how much the new owner might be willing to pay for the business. If your business valuation isn’t quite as high as you expected, there are a few things you can do to raise it before you list your business for sale.

Increase the Profits

Of course, buyers are more willing to pay a larger amount if they know the business is already profitable. However, they want more than just to see the current profits of the business. Continue working to generate more money and cut costs to drive up your profits before you sell the business. This shows potential owners that you are not only bringing in excellent profits now but that they’re steadily increasing and have the potential to increase further in the future. Seeing increasing profits can help encourage buyers to pay more for the business.

Keep Bringing in New Customers

Along with continuing to raise profits, continue bringing in new customers as well. Encourage new customers to go ahead and take advantage of your products or services or start to work on how to get them to become a customer. Try to close any pending leads now, before the business sells, to increase the number of customers your business has. Potential buyers are going to pay more for businesses that have more customers and that are able to continue to bring in more customers.

Have Others Take Over Your Work

Many small business owners are vital for their business. They do a lot of the day-to-day work for the business and help to manage everything. For potential buyers, however, this may not look good. A buyer may feel nervous about investing in a company where the owner does a lot of the work on their own because there’s no one to take over the work when the original business owner sells the company. Instead, hire an employee or two to start learning the jobs you do and to start taking over many of the day-to-day tasks for the business. It’s possible for you to still be closely involved, but you’ll want to make sure the new owner has someone who can run the business after you leave.

Start Creating Documented Routines

How do you do everything? The buyer is going to want to make sure they can keep the business running after you leave. Though you’ve hired employees to take over many or all of the tasks you do, it’s still important to create and write down routines for how the business is run. Well-documented routines let the potential buyer know exactly what to expect when they purchase your business and how to keep everything running smoothly during and after the transition to a new owner.

Keep Your Current Employees

Are your employees going to stay with the business or leave when you do? Well-trained employees provide more stability during the transition to a new owner because they already know what to do and how to run the business. Many new business owners are not going to want to get rid of all of the current employees and have to start training new employees as soon as they purchase the business. Make sure you have well-trained employees who are willing to stay with the business and help get through the transition period. Potential buyers will be more comfortable buying a business when they know the employees are already trained and working.

Improve How the Business Looks

It might be worth the cost to pay attention to how the office actually looks and what can be improved before it’s for sale. New floors, painting the rooms, cleaning up older equipment, and repainting the parking lot can make a huge difference in how the business looks. Businesses that look better appear to be well taken care of, which is ideal for potential buyers. Look around to see what can be fixed up or improved to boost the appearance of your business so it’s more attractive to potential buyers.

Show How Your Products are Different

Potential buyers want to see they can make money off the new business. While increasing profits and customers helps with this, you’ll also want to show how your products are different. Develop patents or trademarks for your products or ideas, and make sure you show off anything that makes your business stand out. This helps show there’s a possibility to do more with the business and to take over more of the market. Buyers want to be able to see why they should purchase your business and not another one in the same market.

Don’t Forget to Keep Going

It’s easy to slow down when it looks like it’s time for you to sell the business but avoid doing this. Instead, you’ll want to make sure the buyer can see that they’ll start making money as soon as they purchase the business. Keep everything going as you prepare for the sale. Work on developing new products or services, upgrading anything that needs to be updated, marketing the business, and more. When the potential buyer can see that everything is continuing to operate and there’s room for increased revenue once they purchase the business, they may be more willing to purchase it.

Even if your business valuation wasn’t as high as you expected, you can still get more for your business. Start following the tips here to increase your company value before you start the process of listing and selling your business. This helps make your business look like a better deal for potential buyers, which can encourage them to pay more when they decide to purchase your business. The more you do prior to listing your business for sale, the more you can make from the sale.