Make your business worth top dollar
Posted on August 8, 2017
If your business can’t run without you, you’re not in the best position to sell.
When your business runs flawlessly without your involvement, its value increases and you’ll have an easier time finding a buyer.
Autonomy is just one of a number of factors that will determine whether your business will sell – and its value.
Getting top dollar for your business starts with a thorough plan.
About 80 per cent of the businesses on the market will not sell. That eye-opening figure is mainly due to owners not planning ahead to sell their business. On the flip-side, if you prepare your business for sale, you have an excellent chance to sell and to increase your profit along the way.
Exit strategies are something every investor wants to see in place. Even if you’re running a one-person sole proprietorship, you need and exit strategy. Some of the factors to consider are your timeline, market conditions, management structure and the type of strategy – such as succession or buyout.
Also before putting your business on the market, get your paperwork in order.
Undertake a thorough review of the company books and ensure that everything is complete and up to date. Be certain all tax returns, government filings and licences are in order.
According to the Sellability Score, here are the eight factors that will determine the value of your business. They are:
1. Financial Performance: The size of your revenue along with your past and expected profitability
2. Growth Potential: Acquirers typically pay the most for businesses with the potential to grow
3. The Switzerland Structure: A business’ sellability requires that the business not be overly reliant on any one customer, employee, or supplier
4. The Valuation Teeter-Totter: Reflects the impact your cash flow, gross margin, and profitability have on the value of your company
5. The Hierarchy of Recurring Revenue: Extent to which an acquirer can see where your sales will come from in the future
6. The Monopoly Control: An enduring competitive advantage gives an owner more control over pricing, increasing profitability, and cash flow
7. Customer Satisfaction: Measures both the extent to which your customers are satisfied and your ability to assess customer satisfaction in a consistent and rigorous way
8. Hub & Spoke: Measures the extent to which your business can thrive without you
For experienced advice, contact Business Finders Canada now at 1-888-377-8009.
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