Business succession expert Leigh Riley says too many businesses don't have a good idea of their real value. Read her three tips to make sure you sell for what your business is worth.
If you are like many business owners I’ve met, you probably have an estimated valuation in mind for your business if ever you had to sell. Too often, those estimates can be so far off beat, it can be detrimental to an owners success. If you’re under-estimating your business valuation, you could be giving away hard earned equity that has taken years to build. If you’re over-estimating, then you won’t meet market expectations that could turn a buyer off and delay or forfeit a potential for sale. Neither would be an acceptable outcome for you.
The time to think about boosting your business valuation is well before any impending exit, which could realistically happen at any time. Last month I wrote about the case of Marnie and Joan whose situation fell into the category of 51% of business owners that exit well before retirement due to circumstances they could not have imagined. They weren’t in the best position to negotiate or capitalise when exiting their million dollar business and sold at a significant and disappointing discount. You’ll want to make sure you’re never caught out like they were by being well prepared to maximise your business valuation and reap the rewards of your hard work no matter what happens.
You want to master and understand the levers you can control to boost your business valuation, because it will benefit you to make the dramatic difference you hope to achieve. Here’s how:
1. Increase earnings in a way that increases your business market value by:
- Increasing sales
- Lowering cost of goods sold and
- Controlling operating expenses
2. Reduce risk to:
- Increase the economic value of activities engaged in your business by understanding the sweet spots that contribute most to your business profitability
- Decrease your business capital base to remove underperforming activities
- Strategise to mitigate specific risks identifiable to your business industry and insure key persons of your company to implement a clearly defined and formal succession strategy
- Operate more efficiently than your competitors and lower the cost of capital by continually testing the market to compare costs of debt and capital raising
- Reduce customer concentration with diversification, so that your business has no more than 10 to 25% of revenue from one source. Signing customers to long term contracts will secure your business revenue into the future, adding a significant valuation boost.
- Form a management structure so you as the owner, are not central to the business
3. Increase your business acquisition attractiveness by:
- Developing a market presence that is desired by potential buyers
- Obtain critical mass with demonstrated consistent growth across niches
- Maintain higher margins than your competitors
- Add value with a management team and systems
- Create effective planning that aligns your business motives with your employee’s actions
If you’d like to master your understanding of the levers that will boost your business valuation to the next level, sign onto the FREE webinar at http://yourbusinesssuccession.com/bizval-webinar1.php. I’ll be interviewing special guest and business valuation guru, Sean Hutchinson, live from San Francisco California. You really can’t afford to miss this FREE session if you want to maximise your business profit and boost its valuation.
Register Now for the FREE webinar at http://yourbusinesssuccession.com/bizval-webinar1.php
Date: Thursday 8th September, 2011
Ask “The Exit Experts” how you can qualify to receive government assistance to take control of your business valuation and formulate your business succession plan www.YourBusinessSuccession.com 1300 499 225
Opinion: Why do so many claim to represent small businesses?
By Adam Zuchetti
Opinion: House prices not all doom and gloom
By Adam Zuchetti
Analysis: How can SMEs realistically stay competitive?
By Adam Zuchetti