Making an effort to raise the value of your small company is often an essential component of a business plan. Value is critical whether we are trying to support present expansion, a future lucrative sale, or a corporate purchase. Some of the things we will talk about today will help in a couple of ways. On the one hand, they will help you create value that will generate more profit. On the other hand, they will open up the possibility of a desirable sale if you decide to move on in the future. If you try to increase the worth of your company, you increase your chances of receiving a substantial cash return when you finally sell it. Therefore, here are the six ways to increase the value of your business before selling.
1. Reduce Your Company’s Risk Profile
As you can imagine, the one thing that most buyers avoid the most is risk. Even though risk is inherent with any business acquisition, that doesn’t mean that you shouldn’t try to mitigate some of it before you decide to sell. In some cases, business owners are not even fully aware of the risk in their business sector. That is normal. If you’ve worked in your industry for years, you’ve probably become desensitized to the risks involved. However, for anyone on the outside looking in, the stakes will be more obvious. Therefore, if you wish to get the best possible deal and sell sooner rather than later, you need to take a step back and evaluate every aspect of your business that could be considered risky.
One of the main reasons buyers will avoid your business is if there are a lot of risks involved.
2. Increase Your Revenue Diversification
One of the most desirable attributes a company can have is revenue diversification. The more diversified your income streams are, the more stable your company will be in the eyes of a potential buyer. It doesn’t matter whether we’re talking about consumers, goods, or suppliers. Diversifying your revenue to reduce risk is desirable in any case. For example, if the vast majority of your company’s revenue comes from only a few customers, this can lower your company‘s value. It all goes back to risk. If you have two major customers and lose one of them, that would be a 50 percent loss in profits. That is enough to put a small company out of business. Similarly, if you depend on only a couple of clients to keep your operations going smoothly, it will hurt your exit plan. Diversification will reduce these risks and may make you seem more attractive than a less-diversified rival.
3. Create Some Recurring Revenue Streams To Increase The Value Of Your Business
It is good to have a diverse revenue stream. However, in some cases, a recurring revenue stream can be even better. Businesses with recurrent income are seen to be less risky. Additionally, depending on the type of business you run, this revenue stream can be highly profitable. This is desirable because it will add great value to your business when you decide to sell. Many buyers seek to acquire businesses with recurring revenue streams because it guarantees them business as soon as they finalize the purchase. There are several recurring income models that your business can benefit from. Some of these are:
- Hard contracts
- Auto-renewal subscriptions
- Consumable products
There are many more that you can find out there. Pick one and try to implement it into your business model. This way, when the time comes to sell, you will have your best foot forward.
Recurring revenue streams are going to increase the value of your business.
4. Have an Up-To-Date Webpage for Your Business
In today’s world, where everyone is connected, and you can find anything and everything you want on the internet, you need to have a functional and attractive webpage for your business. In fact, according to experts from getmovedtoday.com, it is the most important aspect of business today. Their moving company only started thriving when they invested in top-notch website design and started working on their online presence. Your website will be the central hub for getting in touch with your customers. However, it is also where you will garner your reputation as an organization. These days a company without a good website is not considered legitimate.
Additionally, you should consider the way your site looks and functions. You only have one opportunity to create a first impression, and your company’s website is one of the first stops for many prospective consumers. Now is the moment if you haven’t put some resources into this in a while. Your website should clearly express certain vital information about your company. These include what you do, why you do it, how and where people can reach you, and what distinguishes you from your competition.
5. Make Sure You Have a Skilled Workforce in Place
Many business owners who decide to sell their company believe it is the buyer’s responsibility to hire high-quality employees for their new venture. That, however, is not the case. Your goal should be to sell a company with skilled and well-trained employees. Anyone buying a company understands the value of having high-quality employees on hand. This is because hiring and training a new workforce reduces revenue. As a result, most buyers will always prefer a company with a skilled and trained staff over one without it.
Your company will be more valuable if you have a skilled and hardworking workforce.
6. Improve Your Company’s Cash Flow Position
The final of the six ways to increase the value of your business before selling is improving cash flow. Nobody wants to acquire your company only to shut it down soon after because of financial difficulties. Cash flow problems are the leading cause of small company failure. As a business owner, you need to be aware of this. Therefore, if you are selling your company because of financial issues, you should at least try to resolve some of them. Out of all the things we have mentioned on this list, cash flow will have the most impact on the value of your business.