Is selling your business a future consideration? If you are like many business owners, you know you will one day sell your business. Too often owners take time for granted. They always believe they have more time to consider how best to prepare their businesses for sale. The flaw in their thinking is that they really do not know whether the best time to sell is this year, next year, or 50 years from now. I have heard so many stories from people who were offered a lot of money to sell their businesses and turned down the offer only to find only five years later that they could only attract fractions of that offer. It is important to understand how to increase the value of your business and to determine the right time to sell.
3 Primary Reasons For Buying A Business
The primary reason for buying a business is return on investment. They will pay what they consider is a fair price based on 3 primary factors:
1. Does the purchase remove a business barrier?
2. Does the purchase eliminate competition?
3. Is the purchase a strategic fit in terms of
- Geography
- Customers
- Employees
- Tangible and/or intangible assets
1. Does the purchase remove a business barrier?
2. Does the purchase eliminate competition?
3. Is the purchase a strategic fit in terms of
- Geography
- Customers
- Employees
- Tangible and/or intangible assets
7 Ways to Increase Valuation
You should build your business as if it might sell tomorrow. By continuing to improve and monitor the following valuation levers you can increase the value of your business and possibly identify when it is time to sell:
1. Profit Growth Rate - The higher, more predictable, and consistent the pattern the better.
2. Industry or Market Segment Attractiveness - What does the future look like? What do experts say about it? How is your company uniquely positioned to get its fair share?
3. Low (Relative) Market Share - You want to be seen as a leader, but you don't want to be seen as a risk because you have saturated your portion of the market.
1. Profit Growth Rate - The higher, more predictable, and consistent the pattern the better.
2. Industry or Market Segment Attractiveness - What does the future look like? What do experts say about it? How is your company uniquely positioned to get its fair share?
3. Low (Relative) Market Share - You want to be seen as a leader, but you don't want to be seen as a risk because you have saturated your portion of the market.
4. Customer Concentration - A company must not be overly dependent upon a single customer or customer group.
5. Recurring Revenue - This is one of the most favorable because it supports consistency and predictability and also allows for focus on decreasing delivery costs to customers over time - thus increasing profitability through time.
6. Company Size - In terms of revenue, employees, and geographic locations plays a role in salability.
7. Management - Seasoned, experienced in the industry, and with a track record of success are all important. It is hard to find great management talent.
Call Howard Shore for a FREE consultation at (877) 692-6211 to see how an executive business coach can help you run a more effective business or become a more effective leader.
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