How to Increase the Value of Your Business Before Selling

4 Min Read

Michael Gerber, the author of The E-myth, suggests that you should sell your business, regardless if it is an established or one you are considering starting.

Unfortunately, many business owners leave too much time for preparation and need more time to sell the business. Some never plan to sell the industry, while others are caught by surprise by an unplanned illness or other unfortunate events.

Getting started as soon as possible is important to avoid being caught off guard. It’s never too late.

These tips will help you increase your business’s value over the next 24-36 months.

1. Get rid of all unnecessary expenses.

You are likely to write off more than the necessary expenses of your business if you have “good” accountants. The profitability of the business directly affects the value of the company. You cannot maximize your selling price if you reduce your profitability to lower your tax burden. Optimize your business to maximize your profits. This will help you maximize your selling price. This alone will increase the value of your business to potential buyers.

2. Please note any abnormalities which will be corrected.

A professional will evaluate your business and look for ways to “normalize” the books. This is called “recasting.” This will help increase your business’s profitability by removing anything that is not normal. Imagine if your restaurant had to replace its hood system. Because it isn’t “normal” and doesn’t happen every year, this cost would be eliminated. It would be a cost that you can stop to increase your business’s profitability.

3. Replace family members and yourself with staff. 

Start replacing family members working in the business with people unrelated to them. A buyer will look at your business and see that it is less valuable and riskier if there is a mass exodus. Slowly replace family members with staff members who remain with the company after the purchase.

4. Secure key employees.

You will need to establish a retention program to ensure that your employees are essential to the operation. The new owner will feel more secure knowing the key employees will be retained after the purchase. This will reduce risk and make the business more valuable.

5. Systematize your business.

Every task you undertake in your business must be documented and systematized. Your current staff may know exactly what to do, but the buyer will need systems to ensure the company runs smoothly. Document the most important functions first, then the rest of the business. Although this task can be time-consuming, it will significantly affect your business’s sales price.

6. Develop a growth strategy.

This is the right time to increase your marketing efforts, strengthen your sales team, and create a growth plan. Static businesses are more attractive to buyers because they offer greater value. This is the right time to transform your business.

These tips will help you increase your company’s value, increase sales prices and sell your business more quicker.

Download the free report 7 Essential Points Every Business Owner Should Know Before Selling Their Business.

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