6 Ways to Maximize Profit When Selling Your Business
In all situations, the one similarity is the desire to sell your business for maximum profit.
After all, you’ve put your blood sweat, and tears into this endeavor for years. You deserve to get top dollar for all your hard work.
Or do you?
While many factors help determine the value of a business, your opinion isn’t one of them. But, opinions do matter. Specifically, the opinions of your prospective buyer.
As with every purchase, the final decision is as much an emotional decision as a practical one. If you can convince a buyer’s heart that purchasing your business is the right thing to do, their head will require less convincing, and they’re less likely to insist on a lowball offer.
What really drives business value?
Many emotional factors affect the value of your business They impact how the buyer feels about what your company is worth, and these important factors don’t get nearly enough attention:
Growth potential - Buyers want to know if your business can maintain growth. They may identify potential in the number of qualified leads, sales in the pipeline, expansion opportunities, and more. They want to feel confident that your previous successes will be easy to duplicate.
Stable customer growth from multiple sources - Proving your business can connect with leads across a wide spectrum of platforms or locations can boost business value dramatically. Wide market appeal is not just a practical means of achieving ROI but helps make the new business owner start on a high note.
Solid vendor and supplier relationships - If you have good relationships with your vendors and suppliers— particularly important for retailers and restaurants — you can help your buyer hit the ground running with quality contacts, ensuring no interruption in business. This adds tremendous value because they’re heading into a potentially risky situation as part of an established, winning team instead of starting off on their own.
Demonstrated history of repeat business - If your business model successfully encourages repeat business, you increase the lifetime value of every customer. This type of growth hacker model is very appealing to buyers concerned about long-term customer retention.
No history of legal disputes (including branding issues) -If your company’s history is free of legal quicksand, it’s going to be more valuable in the eyes of a buyer. Likewise, if your brand is untarnished when they take it over, it’s worth far more than if your company name brings a bad taste to peoples’ mouths.
Well-documented processes and systems - The easier it is for the new owner to start earning revenue, the more value they will see in your business. This is the beauty of franchising, but even a private sale with no franchise license can still include detailed documentation that helps the new buyer slide into their role seamlessly.
Since these factors increase the value of your business, trying to sell a business deficient in any of these areas would result in a lower valuation. Rather than encouraging a prospective buyers, boosting their confidence, and getting them excited, these emotional triggers would have the opposite effect.
If there’s room for improvement, take the time to do so before putting your company on the market. And, if your business excels in any of these areas, make a point of letting prospective buyers know about it.
When should you start boosting your business value?
You should begin taking positive steps at least a year before you plan to sell because ignoring these factors until closer to the sale can leave you scrambling for time. By applying these tips for a year or more, you should have plenty of time to establish them as integral parts of the business.