To maximise the value of your business, it is instrumental to conduct a thorough analysis of a series of factors during the preparation stage of your business. By addressing any concerns beforehand, actioning improvements and carrying out a valuation of your business to identify the pressure points, you can maximise business worth and establish a competitive asking price. By compiling evidence to back up any financial reporting claims, investment potential and the overall performance of your business, you can facilitate a smooth sale.
Maximising sale value refers to more than the financial worth of the business as reputation, credibility and trust contributes to overall sale value which can hold appeal to prospective buyers. Factors such as growth potential, reliable revenue streams and streamlined operations can help build a unique business identity. We take you through key considerations to make to maximise business sale value and attract higher offers from potential buyers.
To conduct the valuation of your business, you will be required to show a series of accounting records, such as company accounts and an extensive list of assets and liabilities, including proof of intellectual property such as a patent or copyright agreement. In addition to the valuation of your business, you will be required to present a portfolio of financial and accounting records to illustrate the financial journey of your business and performance. Ensure that all information submitted is accurate and up to date to minimise the possibility of your business being overvalued or undervalued as this could disrupt the sale process.
Prospective buyers will conduct due diligence using the aforementioned documents to thoroughly examine the scope of the proposed investment, growth potential and whether the purchase is likely to be cost-effective over the long-term.
Assess growth potential
As part of enforcing a growth strategy from day one of business transfer, buyers will be interested in assessing the future potential of the business and the formation of a long-term plan to pave the way for financial growth. Establishing financial targets for the business at an early stage can help direct investment to achieve these goals and bolster earnings. If you have an existing acquisition or expansion strategy in place, detail this through a comprehensive plan as this could shape the future of the business, adding to the sale value.
Conduct business reporting
The depth of regular reporting carried out on the business and the analysis of financial records will reflect on the business acumen of the owner, the state of business affairs and whether business operations are maintained vigorously or neglected. As part of the business reporting process, managing risk is a significant factor which can affect business performance, cash flow and financial success. Keeping a close eye on cash inflow and outflow will help keep track of the financial health of the business, in addition to ensuring assets balance against liabilities.
Assessing the financial health of the business consists of measuring cash flow, questioning whether this is healthy or staggered as poor cash flow could jeopardise the fulfilment of services and maintenance of business liabilities. Review cash reserves to assess the level of funds available to the business and detail whether this is earmarked for the likes of future investment or emergency funding. Carry out a recent stocktake to give you an accurate reading of the value of stock owned by the business, mitigating overall sale value.
Stress test revenue stream
By inheriting a consistent revenue stream, prospective buyers can be reassured that their investment will see returns instantly as the business will continue to serve loyal customers and fulfil long-term supply agreements. This not only adds sale value to your business but also financial security to prospective buyers when considering the sale of your business. To mitigate the danger posed to revenue streams, ensure that the risk is not concentrated by populating this across a handful of high-value contracts as if the business in question becomes insolvent, this could threaten the viability of your business, so divide consumer risk by diversifying customers.
By streamlining outgoings and minimising unnecessary expenditure, you can reduce overheads and ensure the cost-efficient running of your business. This not only maximises sale value but reduces maintenance which is an attractive quality for prospective buyers as the business requires less financial input. Carrying out regular cost-cutting exercises reflects a well-managed business, an aspect which boasts operational transparency.
By organising materials and information for the viewing of prospective buyers in advance, it reflects on your reliable management style which can maximise value for conscientious buyers. As with owner-managed businesses, there is less likely to be segregation between individuals involved in ownership and management, giving you the upper hand as you’re able to share first-hand knowledge and personal experiences.
At Selling My Business, we have an in-house business valuation team who can share their experience in the trade of selling and buying businesses, including mitigating factors relating to the sale value. We have collective team experience of over 100 years’ in the business transfer industry and a strong track record of selling over 12,000 businesses. The SMB team will guide you through how to value a business and how to determine the financial worth through our free business valuation service. Contact the Selling My Business team to maximise business sale value, prepare your business for sale and attract buyers.