6 Secrets to Maximizing the Sale Price of Your Business
When selling your business‚ maximizing your sale price has to be one of your major goals. It may sound greedy but it isn’t. You have worked very hard and you have earned it. Many times‚ business owners do not have 401(k)’s or pensions to rely on and the business sale is the only “package” that they have. When marketing your business for sale‚ there are a number of things you can do to ensure that you are receiving full value for your business upon its sale.
- Tell your story – every business has a unique component to it that could make it attractive to a potential buyer. For example‚ if your business has been family owned and operated for decades‚ this could be a unique selling point to a potential buyer. Likewise‚ if the goods you sell or services you provide are unique in some respect‚ that should be a focal point of your sale.
- “Window dressing” your business – although many business buyers will focus on the financial information of a business‚ the appearance of your business location(s) will also drive the ultimate selling price. If your selling a storefront business‚ you need to make sure that everything appears clean and orderly. Even if you have to spend some money to make cosmetic repairs to the location‚ the money is well spent and will change the overall impression of the business buyer. If you are selling a business located in an office setting‚ you want to make sure that everything appears organized and efficient.
- Focus on increasing figures – like any investor‚ a potential business buyer is making an investment based upon the perceived future performance of the business. You will want to exhibit the potential for business growth to the buyer so that the buyer sees the complete “upside” to the business. In many instances‚ there will be aspects of your business that are growing and these are the areas you should focus on.
- Develop a business plan – you may have been in business for decades without a business plan and did fine without one. Potential buyers‚ however‚ may have a different perspective on the necessity for business plans and will place value on a well-developed future plan. You probably have thought of some possibilities for business expansion over the years and this may be a good opportunity to display these ideas to a potential buyer. The goal is to allow the buyer to perceive an expanded future for the business. Doing this will make it more likely that they will pay a higher price for the business in its current state.
- Diversity – a big factor for those looking to purchase a business is customer diversity. If 50% of your business comes from one customer or client‚ the buyer will perceive this as a risk and is less likely to put a high value on the business. The buyer’s thinking will be that if this customer finds another place to do business‚ the value of the business would effectively be cut in half. Having a diverse customer base makes it less likely that a substantial portion of the business will be lost in a short period of time and makes the business acquisition less risky for the buyer. Buyers will pay a premium for lower risk investments.
- Value from purchaser’s perspective – it is important to remember that your business may be more valuable to the buyer than it is to you. That is‚ the buyer may be able to use your business in connection with the purchaser’s already existing business by reducing expenses (economies of scale) and purchasing new sources of labor or materials. When negotiating with a certain buyer‚ be sure to think of all of the advantages that the purchaser sees in your business and try to use that to your advantage.
For more information on establishing your business sale price and other important information about selling your business‚ you can request a complimentary copy of ENDWISE: the guide to selling your business with peace of mind (see below).
Category: Business Transactions